An economy is described by the following equations: The multiplier in this economy is 5. (L04, L05)

Question:

An economy is described by the following equations:

The multiplier in this economy is 5. (L04, L05)
a. Find a numerical equation relating planned aggregate expenditure to output.
b. Construct a table to find the value of short-run equilibrium output. (Hint: The economy is fairly close to full employment.)
c. By how much would government purchases have to change in order to elim¬inate any output gap? By how much would taxes have to change? Show the effects of these fiscal policy changes in a Keynesian-cross diagram.
d. Repeat part c assuming that Y* = 630.
e. Show your results for parts b through d on a Keynesian-cross diagram.