Suppose the basic consumption level of Templeland is $15,000 million and that the MPC is 85% of the disposable income. Government spending there is $ 9,000 million and the budget is balanced. The investment level is $ 10000 million; however, investment is independent of income and interest rate. Exports are $ 3000 million but trade is balanced.

Aggregate Demand Z is defined as: Z=C + I + G+(X-M) and the equilibrium condition is Y=Z. The disposable income YD is defined as: (Y-T).

Consumption is: C = C₀ + c₁YD and Investment is: I = I₀.

1. Set up the model for this economy.

2. Calculate and graph the equilibrium level of Real GDP for this economy.

3. What is the multiplier of this Economy?

4. What is the level of consumption at the equilibrium level.

5. If the population of Templeland is 3,000,000 calculate the Real GDP/per capita.