Question: This question is worth two marks. Please show full working out and answer for both parts to gain the two marks. (iii) Suppose Utopia's level

This question is worth two marks. Please show full working out and answer for both parts to gain the two marks.

answer for both parts to gain the two marks. (iii) Suppose Utopia's

(iii) Suppose Utopia's level of exports falls by 20. In response the government considers two possible fiscal policy responses. (a) To increase government spending by 20, or (b) To reduce autonomous taxes by 20. Evaluate the relative effectiveness of each policy as a response to the fall in exports. (2 marks)The economy of Utopia is described by the following equations. C = 10 + 0.8 (Y - T) IP = 20 G = 40 X = 30 T = 10 + 0.2Y M = 0.1Y Y* = 207

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