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Consider a small open economy described by the following equations:
Y = C + I + G + X – M
C = 150 + 0.8(Y-T)
I = 300
G = 150
X = 70
M = 0.2Y
T = 50 + tY
where Y is GDP, C is consumption, I is investment, G is government expenditures, X is exports, M is imports, T is taxes, and t is the tax rate on income. If the economy were at its natural level of output (i.e., full employment), GDP would be 1000.



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