You are given the following information about an economy:

1. (20 points) You are given the following information about an economy: C = C + MPC*DI I = 1 G = G NX = NX T = t'Y where DI stands for Disposable Income a. (5 points) Solve the government purchase multiplier in general form. b. (5 points) Suppose, C = 10, MPC = 0.9, t = 1/3, I = 60, G = 570, and NX = -40, find the equilibrium GDP and the government budget deficit. C. (5 points) Suppose the government, unhappy with the budget deficit, decides to cut the government spending by precisely the amount of the deficit you just found. What actually happens to GDP and the budget deficit, and why? d. (5 points) Suppose the government, seeing that it has not wiped out the deficit, keeps cutting G until it succeeds in balancing the budget. What level of GDP will then prevail