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Problem 1: Building the AEF Function (30 Points] Suppose that we are in an economy with international trade, the government, domestic consumption, and investment

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Problem 1: Building the AEF Function (30 Points] Suppose that we are in an economy with international trade, the government, domestic consumption, and investment. The government retains a tax rate of 10%. Suppose that we observe this economy at two levels of national income (Y) ceteris paribus: (i) Y = 1,000 and (ii) Y = 1,800. The amounts for each of these desired expenditure categories at each of these levels of Y are given by: At Y = 1,000 Consumption = 1,000 Government Spending = 550 Investment = 150 Imports = 100 Exports = 150 At Y = 1,800: Consumption = 1,560 Government Spending = 550 Investment = 270 Imports = 180 Exports = 150 Now suppose that the government wanted to close this surplus or deficit and balance its budget. It does so by targeting its government spending. 10. How much would the government need to change its government spending (G) by to balance its budget? Is this more than, less than or equal to the original deficit or surplus you found in Q8. Why is this the case? [5 points) 11. Calculate the multiplier effect for this economy. Is it consistent with your answer to Part 10? Is the change in Y and the change in G that you solved for consistent with this multiplier? (2 points)