1) Consider the following economy with an income-tax rate of 20% as well as fixed (or lump-sum) taxes of 50 and where the level of Government

G = 200 − 0.15Y

a) What would the equilibrium level of output be in this economy?

b) Is the government running a deficit or a surplus at this equilibrium?

c) What is the value of the aggregate expenditure multiplier for this economy?

d) Everything else equal, what income tax rate (tI ) would produce a balanced budget for the government in equilibrium in this economy?