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An economy is described by the following equations

An economy is described by the following equationsC = 1,800 + 0.6 (Y-T)

Ip = 900

G = 1,500

NX = 100

T = 1,500

Y* = 9,000

Problem: For the economy described above, take as given that the multiplier for this economy is 2.5. Find the effect on short-run equilibrium output of:

A. An increase in government purchases from 1,500 to 1,600

B. A decrease in tax collections from 1,500 to 1,400 (leaving government purchases at their original value).

C. A decrease in planned investment spending from 900 to 800.

A. An increase in government purchases from 1,500 to 1,600 will lead to an increase in short-run equilibrium output of 25 units. B. A decrease intaxcollections from 1,500 to 1,400 (leaving government purchases at their original value) will lead to an increase in short-run equilibrium output of 25 units. C. A decrease in planned investment spending from 900 to 800 will lead to a decrease in short-run equilibrium output of 25 units.To find the effect of changes in government purchases, tax collections, and planned investment spending on short-run equilibrium output, we need to use themultiplier formula. In this economy, the multiplier is given as 2.5.The multiplier formula is:Multiplier = 1 / (1 - MPC)where MPC is the marginal propensity to consume, which is the change in consumption for a given change in income.In this case, we can find the MPC using the consumption function C = 1,800 + 0.6(Y - T). The MPC is the coefficient of (Y - T), which is 0.6.A. An increase in government purchases from 1,500 to 1,600:ΔY = (ΔG) * MultiplierΔY = (1,600 - 1,500) * 2.5ΔY = 25 unitsB. A decrease in tax collections from 1,500 to 1,400 (leaving government purchases at their original value):ΔY = (-ΔT) * MultiplierΔY = (1,400 - 1,500) * 2.5ΔY = 25 unitsC. A decrease in plannedinvestmentspending from 900 to 800:ΔY = (-ΔI) * MultiplierΔY = (800 - 900) * 2.5ΔY = -25 unitsIn the giveneconomy, an increase in government purchases or a decrease in tax collections, both by 100 units, will lead to an increase in short-run equilibrium output by 25 units. On the other hand, a decrease in planned investment spending by 100 units will lead to a decrease in short-run equilibrium output by 25 units.To read more abouttax, visit:brainly.com/question/30157668#SPJ11...

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