Economics: Keynesian Model Question...?

[Ghostwriter]

1. Practice with the Keynesian model

Suppose C = 900 + 0.7 * DI;
I = 400; X = 300; M = 100
G = 600; TR = 200; t = 0.2.

(a) Calculate equilibrium output.

(b) Explain in words what would happen if output were above the level you calculated in (a). What would happen if output were below the equilibrium level?

(c) Recompute equilibrium output assuming that G = 400, holding all else the same as in part (a). Now, recompute equilibrium output assuming that t = 0.3, assuming that G is 600 and holding all else the same as in part (a).