Consider the following behavioral equation C c0 c1YD T t0 t1Y YD Y T G and I are both constant Assume that t1 is between 0 and 1 solve for equilibrium output b What is the
Consider the following behavioral equation: C = c0 + c1YD T = t0 + t1Y YD = Y - T G and I are both constant. Assume that t1 is between 0 and 1. a.Solve for equilibrium output b.What is the multiplier? Does the economy respond more to changes in autonomous spending when t1 is 0 or when t1 is positive? Explain. c.Why is fiscal policy in this case called an automatic stabilizer?