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Consider the simple macro model described by the following equations Y= C + A0 C = a + b(Y – T) T = d + tY Where Y is in...

Consider the simple macro model described by the following equations

Y= C + A0

C = a + b(Y – T)

T = d + tY

Where Y is income, T is tax revenue, C is consumption, A0 is the constant autonomous expenditure, and a, b, d, and t are all positive parameters. Find the

equilibrium values of the endogenous variables Y, C, and T by writing the equations in matrix form and applying Cramer’s rule.

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Answer #1

а у.ct Ao , c-atby-bT) So, -C-Ao T-dt ty Ao ) using amess Aule,eb 1 -1 o -do 1 o: fo (1-0 tabe) to 1(1-0) +1 (-b +bt) to. i1tbt -b יד b 1 -a 0 tbt-b.

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