Answer to Question #13349 in Macroeconomics for Alejandra Ivette

Suppose

C=50+0.8Y
I=70
G=200
TR=100
t=0.2.

a) Calculate the multiplier and the level of equilibrium income

b) calculating the budget surplus (SP)

c) Assume that t rises to 0.25. What's the new equilibrium income and the new multiplier?

d) Calculate the variation of the budget surplus, would the variation of the surplus be higher or lower if c = 0.9 instead of 0.8.