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Consider the following economy: Autonomous Spending: $1,000 Investment: $2,000 Government Spending: $3,000 Exports: $500 C1: .55...

Consider the following economy: Autonomous Spending: $1,000

Investment: $2,000

Government Spending: $3,000

Exports: $500

C1: .55

Tax Rate: .22

Marginal Propensity to Import: .09

a. What is Output (Y) in this economy? __________________

b. What is the multiplier? _________________________

c. What is the autonomous component of this economy (y-intercept): _______________

d. If Investment drops by 20%, by how much must Government spending change to offset the drop in Y: $__________ ($ change in spending) __________% (% change in spending)

e. If Investment drops by 20%, and if the government decides not to spend, by what percent would taxes have to change to offset the drop in Y___________ (% change in tax rate)

f. What is the new multiplier if taxes change? _____________________

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