The economy Taxia is identical to Keynesia, except for net taxes, which are not autonomous, but instead varies positively with the economy's output.

Taxia's net taxes: = 0.0625

a. Is this a more realistic assumption of net taxes than that in Keynesia?

b. Show that the equilibrium output for Taxia is also $8,000 million.

c. Submission not required, for discussion in class. If you were to sketch the aggregate expenditure line for Taxia in a Keynesian Cross, how would its slope differ from the aggregate expenditure line for Keynesia?

d. Suppose government expenditure falls by $200 million.

i. By how much does equilibrium output fall?

ii. Explain how Taxia's tax system makes its economy more stable than Keynesia's.