Question: Suppose that we have a consumption function given as: C = 50 + 0.60(Y - T) where T = taxes, set at 140 billion, and

Suppose that we have a consumption function given as: C = 50 + 0.60(Y - T) where T = taxes, set at 140 billion, and the remaining expenditures are given by | + G + (X -M) =350. Everything is measured in billions of dollars. a) Find the equilibrium value for real GDP (Calculate real GDP to the nearest dollar ) b) Suppose T is increased to 150. What happens to real GDP? (Calculate real GDP to the nearest dollar.) c) Now decrease T to 120. What happens to real GDP? (Calculate real GDP to the nearest dollar.) d) How would you forecast real GDP and its relationship to taxes, knowing these outcomes? When taxes rise, then GDP

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