We have the following model of the economy:

( 1 ) Y = C + S + T (7) G = GA
( 2 ) E = C + I + G (8) T = TA
( 3 ) Y = E (9) YD = Y - T
( 4 ) C = c(YD, CA) (10) Deficit = G - T
( 5 ) S = s(YD, SA)
( 6 ) I = IA

The following data for equilibrium values will help in this problem.

G = 3,000
I = 1,800
S = 2,400 ?S/?Y = .25
T = 2,400 Y* = 9,000

Calculate

1. the equilibrium value of consumption C = ________

2. marginal propensity to consume (?C/?Y) MPC = ________

3. the expenditure multiplier m = ________

4. The government deficit now has a value of ____________.

Pessimism occurs in the business community. Planned investment falls by 150. How much of an effect does this have on equilibrium GDP?

5/6. GDP will RISE / FALL by ____________.

The Administration attempts to restore the original GDP level by changing the tax level.

7/8. Autonomously taxes should be RAISED / REDUCED by __________ (a number)

Calculate the government deficit after the economy has reached its final equilibrium, after the investment change and tax change.

9. Deficit = __________

Calculate the final total value for consumption, after the investment change and tax change.

10. C = ___________