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

Taxias net taxes: = 0.0625

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

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

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?

Suppose government expenditure falls by $200 million.

By how much does equilibrium output fall?

Explain how Taxias tax system makes its economy more stable than Keynesias.