You are given the following income-expenditures model for the economy of a town:

C = 500 + .8Yd

I = 200

G = 400

T = 300

1. Calculate the equilibrium level of income in this town
2. Draw a graph that illustrates the town's economy at equilibrium
3. What does it mean for the economy of this town to be in equilibrium?
4. What would the level of expenditures be if the economy of this town were operating at $3,000? Make a forecast for the future of the town's economy

Question 5:

a.What is the current budget surplus or deficit of this town? Explain.

b.Using the government spending multiplier, demonstrate how the budget could be balanced and show what the impact would be on the macroeconomy.

c.Using the tax multiplier, demonstrate how the budget could be balanced and show what the impact would be on the macroeconomy.

d.Given his priority of balancing the budget, what change in the budget would you recommend to accomplish this?