Suppose that the consumption function is give by

C(Y)=180+0.70(YT)

,Planned investment is 100, government spending is 80 and government taxes are 30. The export is 50 and the import is 80.

(a)Solve for the equilibrium level of income, and sketch the Keynesian cross.

(b)Suppose that the government would like to change GDP by changing the tax revenues only. If the government decreases the tax revenues by 18, how much would the aggregate output change? Please apply the multiplier to solve this problem. 5 points.

(c)If the government aims to change the GDP to the same level as it in part (b) by changing the government spending only. Please use the multiplier again to derive how much the government spending should be changed.