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Suppose C=50+0.8Y I=70 G=200 TR=100 t=0.2.
a) Calculate the multiplier and the level of equilibrium income
b) calculating the budget surplus (SP)
c) Assume that t rises to 0.25. What's the new equilibrium income and the new multiplier?
d) Calculate the variation of the budget surplus, would the variation of the surplus be higher or lower if c = 0.9 instead of 0.8.
Find the following: First solve this problem using an Excel spreadsheet approach and then do the problem using the optimization procedure; compare the answers for the two methods.
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