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Given the following information ($ billions):
Ca = 20
G = 10
I = 15
MPC = 0.8
Y = C + I + G
Find the equilibrium level of income (Y*). Construct an aggregate expenditures model showing this information. What happens to RGDP if government spending decreases by $5 billion? Provide specific numbers. Suppose this economy opens up to trade. If exports = $5 and imports = $7, what will be the new equilibrium level of income assuming we are starting at Y* in part (a)?
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