Assume an economy is represented by the following:
(a) Calculate the equilibrium level of output.
(b) Based on your analysis in Part (a), calculate the levels of consumption and saving that occur when the economy is in equilibrium.
(c) Now suppose planned investment rises by 100. Calculate the new equilibrium level of income. Given your answer, what is the size of the multiplier?
(d) What is the size of the tax multiplier for this economy?
Definitions:
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