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Given the following information about a nation’s economy, answer the questions below. C = 250 +...

  1. Given the following information about a nation’s economy, answer the questions below.

C = 250 + .8 Yd                        T = 100

I = 275

G = 175

X = 65

M = 70

  1. Use algebra to solve for equilibrium. (You must show ALL of your work.) Recall that in equilibrium, TE = TP =Y.
  2. Calculate the multiplier.
  3. Refer to part (a) and simplify the TE equation into standard slope-intercept form:

TE = A + MPC*Y    If you can not easily see this in your algebra in part (a), simply take the given information and re-derive the equation by collecting like terms and simplifying.

  1. What is the sum of autonomous expenditures (A = intercept)?
  2. Use the equation in part c to graph the Keynesian AE curve for this economy. Make sure to identify the intercept (A), slope and equilibrium incom
  3. Is the government’s budget in balance? (Hint: Compare T & G) Is there a surplus or deficit?
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