Suppose the United States economy is represented by the following equations:
Z = C + I + G C = 500 + .5YD T = 600 I = 300
YD = Y - T G = 2000
a.Given the above variables,calculate the equilibrium level of output.
b.Now,assume that government spending decreases from 2000 to 1900.What is the new equilibrium level of output? How much does income change as a result of this event? What is the multiplier for this economy?
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