THE AGGREGATE EXPENDITURE MODEL (IN THE SHORT RUN) YOU MUST SHOW YOUR CALCULATIONS IN THE SPACE BELOW FOR THE NEXT PROBLEM USE THE FOLLOWING FORMULA: CHANGE IN GDP = [ - MPC / (1-MPC) ] * CHANGE IN T Initially, the economy is producing well below the level of potential output of $16 trillion in goods and services. Also, currently net taxes is $2.6 trillion. According to precise government's estimates, the government believes that by reducing net taxes to $1.7 trillion the economy will achieve full employment.

a) What is the value of the net taxes multiplier? Explain thoroughly

b) Could you compute the initial level of output in the economy? Explain thoroughly Assume that the marginal propensity to consume is 0.7 (MPC=0.7).