Question

C = 450 + 0.4Y

I = 350

G = 150

X = 70

Z = 35 + 0.1Y

T = 0.15Y

Yf = 1550

 

Q.2.5 Calculate what the new equilibrium income should be if the government of this country decides to cancel all taxes, implying the tax rate would now be 0%.

Q.2.6 Before the government decreased the tax rate, how much of government spending was required to bring the economy to full employment?

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