Consider the following consumption function: C (Y)=0.8(Y-T) where Y represents income and T represents net taxes. Suppose that investment, I, is 100; government spending, G, is 200; and, net taxes, T, are 100. 1)The equilibrium level of output is:   a. 1200   b. 900   c. 1100   d. 1000 Tha values for the government expenditure and tax multipliers are, respectively:   a. 5 and -4   b. -2 and 2   c. 2 and 2   d. 2 and 4

Assuming T = 0, for the following three consumption functions, i) identify the mpc and mps, iii) tax multiplier, and ii) calculate the expenditure multiplier: (be sure to give the formulae for the two multipliers) a. C = 100 + 0.75 Y^d. b. C = 50 + 0.9 Y^d . c. C = 200 + 0.8 Y^d

Questions  A, B, and C are associated with each other. Please answer all three. Thank you!

The marginal propensity to consume out of permanent income equals 0.9 and the marginal propensity to consume out of transitory income equals 0.1. Suppose that there is an emergency increase in government spending of $200 billion to repair infrastructure. The spending takes place within a year. The spending increase is financed by a one-time increase in taxes. Prior to the increase in government spending, permanent income equals $9,600 billion and transitory income equals zero. (a) Compute the amounts of consumption expenditures and private saving prior to the tax increase. (b) Compute the amount of changes in consumption expenditures and private saving, given that the tax increase lasts for only one year. (c) Compute the initial change in aggregate demand that results from this combination of increases in government spending and taxes.