Explain why the multiplier falls when taxes depend on income.   .1 Assume the following for the economy of a country:   a. Consumption function: C = 60 + 0.75Yd   b. Investment: I = 75   c. Government spending: G = 45   d. Net taxes: T = - 25 + 0.2Y   e. Disposable income: Yd. = Y - T   f. Equilibrium: Y = C + I + G   Solve for equilibrium income. How much does the government collect in net taxes when the economy is in equilibrium? What is the government’s budget deficit or surplus?

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