3. In a more realistic model, taxes are a function of income T= 3x. Suppose T = 0.2Y and: C= 50+ 0.75 YD II): 100 G= 400 NX=50 A. Calculate equilibrium GDP and illustrate graphically. What is the budget surplus (or decit)? B. Suppose we reduce G by 100 to 300. What would the new equilibrium income be? Show graphically. Calculate the government spending multiplier two ways (AY/AG and with the formula). Why is this smaller than in problem 1B? (You will have to calculate the multiplier for problem 1 using the formula to answer this.) What is the scal decit? Explain why the decrease in G did not balance the budget. What does this suggest for efforts to balance the budget during a recession? C. Suppose instead of reducing G, we raise taxes to T = 0.33Y. Calculate the new equilibrium GDP and illustrate graphically. What is the new scal decit? Calculate the new government spending multiplier AY/AG (not the tax multiplier AY/AT hint: use the formula for the government spending multiplier in the slides when taxes are proportional to income). Why is this smaller than the multiplier in part B when T = 0.2