Suppose that an economy is given by the follO\ving equations: C100 + 0.8 (Y - T) ,I20, GT10.

The full employment level of output of the economy is Yr= 600

i) By how much will the govermnent have to change its eA'Penditure to achieve full employment equilibrium?

ii) If the govenunent wants to achieve the same target by changing the level of lump sum tax,

then by how much will it have to change T?

iii) By how much will U1e government have to change its expendihue to achieve full employment equilibtium whengovenunent ex'Penditure is fmanced by levying lump sum tax of the same amolUlt?

iv) Derive the equation and slope of U1e I S - cUive when in U1e above model T = 0.2Y and U1e

inveshnentflmction is changed to I = 34 - 6i.