Use the following information about an economy to answer the following questions:

C = 200 + 0.8Yd where C = consumption expenditure

I = 110 I = investment expenditure

G = 200 G = government expenditure

NX = 50 - 0.1Yd NT = Net taxes

Yd = Y - NT NX = net exports Yd = disposable income Y = national income

(a) Suppose the government's objective is to balance its budget (i.e. NT = G), what would be the equilibrium level of income?

(b) At the equilibrium, what is the corresponding level of consumption, saving (S = Yd - C) and net exports? Is this economy running a trade surplus or deficit?

(c) What is the multiplier of this economy? If the government spending increases by 10 (but net tax remains the same), what is the impact on the equilibrium level of output? What is the impact on the value of net exports?