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Consider the following model:
i) C =1500 +mpc(Y –tY)
ii) I=800
iii) G=500
iv) X-M = 500 –mpi (Y)
where:
t=the (flat) tax rate
mpc= the marginal propensity to consume
mpi= the marginal propensity to import
Suppose, mpc = .80, t =.25, mpi=.2
Given the information above, solve for the equilibrium output:
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