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Fredonia has the following consumption function: C=100+.8DI Firms in Fredonia always invest $700 and net exports are zero, initially. The government budget is balanced with spending and taxes both equal to $500 each.

A. Find the equlibrium level of GDP

b. How much is saves? Is savings equal to investment?

c. Now suppose that an export-promotion drive succeeds in raising net exports to $100. Answer (a) and (b) under these new circumstances.

$2.19