Assume the following open economy for Questions 1a, 1b, 1c and 1d below:
C = 200 + 0.75(Y – 100)
I = 130
G = 200
M = 115
A) Determine (solve for) the equilibrium level of income or GDP (Y).
B) Determine the impact on income of a 50 increase in government spending from 200 to 250.
C) If the government seeks to increase income by 40, how much should it raise government spending?
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