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Please show your answer clearly, thanks. 4. Assume now that Home Economy wants to achieve a level of output, YP : 62.5, by changing its

Please show your answer clearly, thanks.

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4. Assume now that Home Economy wants to achieve a level of output, YP : 62.5, by changing its taxes, T. While doing so, it assumes that Foreign Economy will not change its fiscal policy (neither G*, nor T*). You are asked to find by how much the government in Home Economy must change the taxes level, T, to achieve the targeted level of output? (Note that the levels of investment and government spending in Home Economy remain the same as above. (7 points) Consider the following world that consists of two economies: Home Economy and Foreign Economy. Foreign variables are starred. Assume that both countries either use the same currency, or that the real exchange rate is fixed and normalized to one. C = 10+0.6(YT) I = T G = C T = T Q = 0.11% X = 0.1Y*

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