Suppose you know the following information about the economy

: Autonomous consumer spending is $200 billion.

Autonomous investment spending is $100 billion.

Autonomous government spending is $150 billion.

Autonomous net export spending is $75 billion.

The flat tax rate is 15% or 0.15.

The marginal propensity to consume is 0.7.

Use the above information for these problems:

The full employment output is $1500 billion. What level of government spending will generate this level of output as the equilibrium output? What will tax revenues be at this output level? What will be the state of the government budget at this output level? The government implements austerity measures in the hopes of balancing the budget. What should it do? What is the new equilibrium output. Does the result surprise you? How is this outcome possible?