1. Assume an economy is represented by the following: C = 240 + 0.6Yd I = 400 G = 2000 T = 2000 a. Calculate the equilib

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answerhappygod
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1. Assume an economy is represented by the following: C = 240 + 0.6Yd I = 400 G = 2000 T = 2000 a. Calculate the equilib

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1. Assume an economy is represented by the following: C = 240 +0.6Yd I = 400 G = 2000 T = 2000 a. Calculate the equilibrium levelof output. (3 marks)
b. Calculate the levels of consumption and saving that occurwhen the economy is in equilibrium. (5 marks)
c. Suppose the government increases it expenditure to 3500 i.Explain an expansionary fiscal policy and the crowding out effect.(5 marks) ii. Calculate the new equilibrium level of income. (4marks) iii. Given your answer, explain the size of the spendingmultiplier? (3 marks)
d. Graphically illustrate using the AE - Y graph the equilibriumincome points. (5 marks)
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