Question 1 Suppose in an open economy the consumption function take the form C=100+0.8 Tax is the proportion of income with the tax rate to be given by 0. 2. Meanwhile import depends on the domestic income with the function given by
1. Given the government expenditure, whether the government budget is in surp lus or deficit dep ends on the tax revenue which itself depends on rate of tax. Please derive the tax rate at which the government budget is in balance. Draw the graph that reflects the relation between tax rate and deficit (or surplus)