Calculate the open economy multiplier with proportional taxes, T = tY, instead of lump−sum taxes as assumed in the text.
Suppose C = 40 + 0.8Y D. T = 50, I = 60, G = 40, X = 90, M = 50 + 0.05Y
a) Find equilibrium income
(b) Find the net export balance at equilibrium income
(c) What happens to equilibrium income and the net export balance when the government purchases increase from 40 to 50?
In the above example, if exports change to X = 100, find the change in equilibrium income and the net export balance.