Y6

Suppose consumption in the economy is described by the following equation. C=80+0.75(Y-T), C=consumption, Y=income for consumers or real GDP, T=net taxes=taxes-transfer payments, (Y-T)=disposable income, 80=autonomous consumption, 0.75=marginal propensity to consume. Government spending multiplier is 4 and tax multiplier is -3.(a) If the government changes spending by 25, by how much does real GDP and consumption change?(b) If the government wanted to change real GDP by the same amount as part (a) using taxes, by how much do they need to change taxes?