5 Assume the following Keynesian model for the economy of Boogerland: Y = C + I + G + (X – M) C = 200 + 75Y I = 400 G = 200 (X – M) = 200 T = 0 a Find the equilibrium level of GDP b Using a “Keynesian...

5 Assume the following Keynesian model for the economy of Boogerland:

Y = C + I + G + (X – M)

C = 200 + 75Y

I = 400

G = 200

(X – M) = 200

T = 0

a Find the equilibrium level of GDP

b Using a “Keynesian cross” (or 45-degree line) diagram, show graphically the

equilibrium in part a)

c What is the spending multiplier in this model?

d What is the level of consumption at equilibrium? Saving?

e If government spending increases by $100, find the new equilibrium level of

GDP Show graphically

f Starting back in a), if the consumption function is given by

C = 200 + Y

instead, what is the new equilibrium level of GDP? Show graphicall