Suppose a government is established in a country where none previously existed. The government spends 100, financed by borrowing, to provide public services. If autonomous consumption, investment and exports minus autonomous imports is 200, MPC is 0.7 and MPM is 0.1, what are the equilibrium real GDP values before and after the government is established?

Note:Keep as much precision as possible during your calculations. Your final answer should be accurate to at least two decimal places.

a)What is the equilibrium real GDP value before the government is established?

Y₀=

0

b)What is the equilibrium real GDP value after the government is established?

Y₁=

c)Now suppose the government expenditure was financed by imposing a net tax rate on income of t = 0.2, what equilibrium real GDP would result?

Y₂=

d)What is the multiplier before the tax is imposed?

Multiplier before tax =

e)What is the multiplier after the tax is imposed?

Multiplier after tax =