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Write down the equilibrium values for:AD*=Y*=C*=I*=G*=T*=m=Marginal propensity to consume=using this (1) c=1000+0.4(y-t)(2) i=500(3) G=400(4) t=300

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Solution

To find the equilibrium values for AD*, Y*, C*, I*, G*, T*, m, and the marginal propensity to consume, we can use the given equations:

(1) c = 1000 + 0.4(y - t) (2) i = 500 (3) G = 400 (4) t = 300

Let's solve for each variable step by step:

  1. AD* (Aggregate Demand): AD* = C* + I* + G* Since we don't have the value for C* yet, we'll come back to this equation later.

  2. Y* (Equilibrium Output): Y* = AD* Since we don't have the value for AD* yet, we'll come back to this equation later.

  3. C* (Consumption): Using equation (1), we substitute the given values for t and solve for C*: C* = 1000 + 0.4(Y* - T*) Substituting the given value for T*: C* = 1000 + 0.4(Y* - 300)

  4. I* (Investment): Using equation (2), we substitute the given value for i: I* = 500

  5. G* (Government Spending): Using equation (3), we substitute the given value for G: G* = 400

  6. T* (Taxes): Using equation (4), we substitute the given value for t: T* = 300

  7. m (Marginal Propensity to Consume): The marginal propensity to consume is given as m.

Now, let's go back to equation (1) and substitute the values we have found so far: C* = 1000 + 0.4(Y* - 300)

Next, we substitute the values for C*, I*, and G* into the equation for AD*: AD* = C* + I* + G* AD* = (1000 + 0.4(Y* - 300)) + 500 + 400

Finally, we substitute the value for AD* into the equation for Y*: Y* = AD*

At this point, we have found the equilibrium values for AD*, Y*, C*, I*, G*, T*, and m.

This problem has been solved

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