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4. Consider the following model of the economy: C=c0+c1Yd ; T=t0+t1Y; and Yd= Y G and...

4. Consider the following model of the economy:

C=c0+c1Yd ;

T=t0+t1Y; and

Yd= Y

G and I are both constant.

(a) Is t1 greater than or less than one? Explain.

(b) Solve for the equilibrium output.

(c) What is the multiplier? Does the economy respond more to changes in autonomous spending when t1 is zero or when t1is positive? Explain.

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