Suppose that the economy is given by the following equation

C= 100 +0.8 (Y-T), I = 20, G= T =10

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

By how much the government will have to change its expenditure to achieve full employment equilibrium ?

4. Suppose that an economy is given by the following equations: C=100+0.8 (YT),I=20,G=T= 10. The full employment level of output of the economy is Yf= 600 i) By how much will the government have to change its expenditure to achieve full employment equilibrium? ii) If the government 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 the government have to change its expenditure to achieve full employment equilibrium when government expenditure is nanced by levying lump sum tax of the same amount? iv) Derive the equation and slope of the IS ~ curve when in the above model T = 0.2Y and the investment function is changed to I = 34 t. (10 marks)