Question: 11. Assuming the following macroeconomic model, with Consumption function: C = 120 + 0.8(Y-T) Planned investment: I = 200-10r; Government purchases G = 300 Taxes

11. Assuming the following macroeconomic model, with Consumption function: C =

11. Assuming the following macroeconomic model, with Consumption function: C = 120 + 0.8(Y-T) Planned investment: I = 200-10r; Government purchases G = 300 Taxes = 300 a) Draw the investment function b) Draw the IS equation using the graphs for investment function and planned expenditure function and assess how investment and income changes when the value of interest rate changes 12. In equation "10" above, if tax is not fixed and varies with income specified as, T = tY ; where t is the marginal tax rate, or the amount of tax that individuals pay as their income increase by $ 1. a) How does this tax system change the way consumption responds to changes in GDP or income? b) How does this tax system alter the government-purchases multiplier? c) How does this tax system alter the slope of the IS curve

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