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The economy is a closed economy. Interest rate, r, is held constant at 0.05 (5%) and...

The economy is a closed economy. Interest rate, r, is held constant at 0.05 (5%) and prices are held fixed. The economy can be described by the following equations.

Consumption: C = 300 + 0.5YD; where YD = disposable income Investment:

I = 200 – 10(r – 0.05),

Government spending: G = 300

Taxes: T = 120 + .21Y

Transfers: TR = 100 - .04Y

What is the equilibrium level of output for this economy (rounded to the nearest unit)?

Find the equilibrium level of government saving.

The economy is initially in its equilibrium as shown in Question 3 (Part 1). Suppose firms become more optimistic about the future greater profit opportunities in the future and as a result, they decide to increase their investment. As a result, autonomous investment rises by 20%. What is the new equilibrium level of output after the change in autonomous investment?

This question continues with the change in autonomous investment that occurred above. As a result of this shock has the level of government savings changed? If so, has it gone up or down? Can you determine how much it changed by?

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