Suppose that the government of Ansonia is experiencing a large budget surplus with fixed government expenditures of G =200 and fixed taxes of T =150. Both G and T are independent of income. Assume that consumers of Ansonia behave as described in the following consumption function.

C = 300+0.80(Y−T)

Suppose further that investment spending is fixed at I = 200

Calculate the equilibrium level of GDP in Ansonia. Solve for equilibrium levels of Y, C, and S

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At equilibrium aggregate expenditure equals income That is Y C I G Plugging in all th... View the full answer