. Suppose consumption is given by C = 1000 + 0.75 x Disposable Income while investment is given by I = 2000 – 20r. If government expenditures equal 0 (no expenditures) and the tax rate is 1/3 (the government collects 1/3 of income as tax revenue), what is the equation of the IS curve? What are the values r-intercept and the Yintercept? 2. Using the data from #1, compute the value of the multiplier. 3. Using the data from #1, suppose the full employment level of output is 5000. What is the full employment equilibrium level value for r? 4. Using the data from #1, what is the government’s budget balance at the full employment level of output? 5. Using the data from #1, suppose that the government decides to start spending. This raises government purchases from 0 to 2000. What is the equation for the new IS curve? By how much does the curve shift? Is this the amount predicted by the multiplier calculated in #2?

. Suppose consumption is given by C = 1000 + 0.75 x Disposable Income while investment is given by I = 2000 – 20r. If government expenditures equal 0 (no expenditures) and the tax rate is 1/3 (the government collects 1/3 of income as tax revenue), what is the equation of the IS curve? What are the values r-intercept and the Yintercept?
2. Using the data from #1, compute the value of the multiplier.
3. Using the data from #1, suppose the full employment level of output is 5000. What is the full employment equilibrium level value for r?
4. Using the data from #1, what is the government’s budget balance at the full employment level of output?
5. Using the data from #1, suppose that the government decides to start spending. This raises government purchases from 0 to 2000. What is the equation for the new IS curve? By how much does the curve shift? Is this the amount predicted by the multiplier calculated in #2?