The following information is provided about an open economy with a government.  C = 450 + 0.4Y I = 350 G = 150 X = 70 Z = 35 + 0.1Y T = 0.15Y Yf = 1550 1. Calculate the level of autonomous spending in this economy.  2. Calculate the size of the multiplier (Note: Round your answer to two decimal places) 3. Calculate the equilibrium level of income (Hint: use the multiplier method)

Question

The following information is provided about an open economy with a government. 


C = 450 + 0.4Y
I = 350
G = 150
X = 70
Z = 35 + 0.1Y
T = 0.15Y
Yf = 1550


1. Calculate the level of autonomous spending in this economy. 

2. Calculate the size of the multiplier
(Note: Round your answer to two decimal places)

3. Calculate the equilibrium level of income
(Hint: use the multiplier method)

4. Calculate the tax revenue to the government of this country when the economy remains in equilibrium.

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%.

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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