Suppose that within the open-economy version of the Keynesian model in Section 7, we now include taxes.

Question:

Suppose that within the open-economy version of the Keynesian model in Section 7, we now include taxes. Disposable income (YD = Y - T) therefore replaces GDP (Y) in the consumption function (24). Compute the expression for equilibrium income for this version of the open-economy model. Compute an expression for the tax multiplier (ΔY/ΔT) in the model.