Assume the following open economy C 300 +0.80(Y-125) I=150 G=250 X=115 M = 125+.05Y a. Determine...

 

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Assume the following open economy C 300 +0.80(Y-125) I=150 G=250 X=115 M = 125+.05Y a. Determine (solve for) the equilibrium level of income or GDP (Y). b. Determine the impact on income of a 50 increase in government spending from 250 to 300. c. Using the original data, compute the impact of a 50 decrease in taxes from 125 to 75. d. If the government seeks to raise income to 3,000, how much should it raise government spending? Assume the following open economy C 300 +0.80(Y-125) I=150 G=250 X=115 M = 125+.05Y a. Determine (solve for) the equilibrium level of income or GDP (Y). b. Determine the impact on income of a 50 increase in government spending from 250 to 300. c. Using the original data, compute the impact of a 50 decrease in taxes from 125 to 75. d. If the government seeks to raise income to 3,000, how much should it raise government spending?

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Answer a To find the equilibrium level of income or GDP Y we need to set total output equal to total ... View the full answer