Suppose that the following information is given (Y_d is disposable income):

C= 100 + (.75) (Y-T) G= 250

I= 150 t= 20% M= .15Y_d

1. What would be the effect on output of a $50 increase in government spending? Show your work.

1. What if the marginal propensity to import was to increase. What would be the effect on output? Describe why it would affect economic activity.

1. What would be the effect on the equilibrium level of output if the tax rate were to increase?Explain and draw a graph of the goods market.