Tax multiplier K=-b/( 1-b), so K=-0.8/( 1-0.8)=-4, so increasing tax 130 reduces income 130×4=520.

Tax reduction 125 increase income by 500.

The multiplier of government purchase is K= 1/( 1-b), so K=5, so reducing government purchase 100 reduces income by 500.

Transfer payment multiplier K=b/( 1-b), so K=4, so reducing 120 reduces income by 480.

Choose a for this question.

The second question describes that the three-sector economy has no foreign trade, so the net export NX=0.

( 1)y = c+I+g+NX = 100+0.8(y-400)+460+400

Y 1 is obtained from this equation, and then the consumption at equilibrium c 1= 100+0.8(y-400) is obtained from the obtained Y.

Of which 400 yen is disposable income.

(2) If the government procurement drops to 30 billion yuan, then replace the second 400 in (1) with 300, and solve the equation again.

New solution y2 and c2 can be obtained.

The variations are y2-y 1 and c2-c 1.

This is a solution to two problems. The second question has no transfer payment, so the transfer payment is 0. Don't use formulas.