Question

Suppose an economy is represented by the following equations. Consumption function C = 300 + 0.8Yd...

Suppose an economy is represented by the following equations.

Consumption function C = 300 + 0.8Yd

Planned investment I = 400

Government spending G = 500

Exports EX = 200

Imports IM = 0.1Yd

Autonomous Taxes T = 500

Marginal Tax Rate t=0.25

Planned aggregate expenditure AE = C + I + G + (EX - IM)

By using the above information calculate the equilibrium level of income for this economy and explain how multiplier changes when we have an open economy

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