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An economy has the following consumption function:
C=200 + 0.8 DI
The government budget is balanced, with government purchases and taxes both fixed at $1,000. Net exports are $100. Investment is $600.
1) Find equilibrium GDP.
2) What is the multiplier for this economy?
3) If G rises by $100, what happens to Y? What happens to Y if both G and T rise by $100 at the same time?
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