Q. 1. Assume which the government of Lump land is enjoying a fat budget surplus with fixed government expenditures of G=150 also fixed taxes of T= 200. Assume which consumers of Lump land behave as described in the subsequent consumption function: C=150+.75(Y-T) Assume further which investment expenditure is fixed at 100. Compute the equilibrium level of GDP in Lump land. Solve for equilibrium levels of Y, C also S. Next assume which the Republican Congress in Lump land succeeds in reducing taxes by 20 to a new fixed level of 180. Re Compute the equilibrium levels of Y, C also S after the tax cut also check to ensure which the multiplier worked. Illustrate what arguments are such as to be utilized in support of such a tax cut? Illustrate what arguments might be utilized to oppose such a tax cut?

2. Assume which all tax collections are fixed (instead of dependent on income) also all expenditure also transfer payments programs are also fixed (in the sense which they do not depend on the state of the economy).If this were the case would there be any automatic stabilizers in the government economy? Would there be any distinction between the full-employment deficit also actual budget deficits? Explain.