A simple closed economy has the consumption function C = 280 + 0.8Y^d, where Y is income, T is direct taxation, I is investment, and G is government expenditure - all autonomous.

i) Find the taxation, investment and government expenditure multipliers; ii) If I = 1000, G = 800 and T = 900, find the equilibrium level of income of the economy;

iii) If G increases by 120 evaluate the new equilibrium level of income and compare the change in income with that predicted by the multiplier;

iv) What is the balanced budget multiplier?

v) If T increases by 120 at the same time as G increases by 120, what change in equilibrium income does the balanced budget multiplier predict? Does it correspond to the actual change?