Question: Given the following information, and assuming fixed prices: C = 25 + 0.9Yd I* = 125 t = 0.20 G = 50 Yd = (1

Given the following information, and assuming fixed prices:

C = 25 + 0.9Yd

I* = 125 t = 0.20 G = 50

Yd = (1 - t)NP

a) Solve for the equilibrium level of NP. b) If desired investment increased by 10 what is the new equilibrium level of output. c) If government spending increased by 10 what is the new equilibrium level of output ? d) What is the multiplier ? (Keep in mind that a proportional tax is in place in this economy). e) If the tax rate changed to 0.25 what is the new equilibrium ?

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