8. The equations below should be used to answer Question #8. The equations describe the expenditures within Country X and we'll assume that they conform to the assumptions we've made in lecture regarding the fixed price level Aggregate Expenditure model. All values for expenditure and income are dollar amounts, but for simplicity, we've dropped the $ below.

C = 0.8(DI) + 1600 (C = consumption expenditures, DI = disposable income) I = 2000 (I = investment expenditure) G = 1000 (G = government expenditure) X = 1800 (X = spending on exports) M = 1600 (M = spending on imports) DI = Y - T (Y = real GDP, T = tax revenues) T = 1000

Assume that you want to change the equilibrium GDP by changing G and then T. Use the equations above to answer part a and then part b.

a. If G increases by 1000, then equilibrium GDP changes by______

b. If T decreases by 1000, then equilibrium GDP changes by_____