Business, 24.12.2020 21:00, angie249

Consider an economy with no foreign trade and no transfer payments whose consumption function is given as C = 100 + 0.9(Y ? T). (a) Initially let G = 800, T = 800, and I = 300. What is the level of Y? Assuming that taxes follow the simple function, T = ?Y, what is ?? (b) Holding ? constant, what is the effect on Y of increasing G by 100 to 900? (c) What is the effect ceteris paribus on Y of decreasing T by 100? At what value must the government set ? to achieve this tax cut? (d) Explain why the effects in (b) and (c) are different. (e) Suppose that the government wanted to maintain a balanced budget and increased both G and T by 100. What would be the effect on Y? What ? would it need to choose to keep the budget balanced?

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Consider an economy with no foreign trade and no transfer payments whose consumption function is giv...