please answer questions b c d Problem Consider the following open economy (Home economy). The real exchange rate is fixed and equal to one. Saving, investment, government spending, taxes, imports and exports are given by: S = -80+ 0.18Y (1) I = I G = G T = To+t₁Y Q = 9₁Y X = X₁Y* where To is the level of autonomous taxes, q₁ and X₁ are, respectively the marginal propensity to import, and export reaction to the foreign country's income. An asterisk is used to designate variables related to the foreign economy. |||| |||| 5. Assume Foreign economy has the same equations as Home economy. Moreover, use the following values for the remaining autonomous variables: I = 500, G = 500. (a) Solve for the equilibrium values of income, Y, and Y* in both economies. I= 500, G = 500. Q-0.1 Y, x₁ = 0.1 Y*, t₁ = 0.1, To = 100 For home economy S+T-G=I+X-Q -80+0.18Y+100+0.1Y-500-500+0.1Y*-0.1Y 0.28Y-420+0.1Y=500+0.1Y* 0.38Y-920+0.1Y* Y (920+0.1Y*)/0.38 Y=2421.052+0.263Y* since same equations hold for foreign economy as well 0.38Y-920+0.1Y 0.38Y-920+0.1(2421.052+0.263Y*) Y-3285.567 Y-920+0.263*3285.567 =1784.104 (b) Find the tax multiplier for each economy now? (c) Why is it different from the multiplier found above using the given values for the autonomous variables? (d) Find the equilibrium values for government and trade deficits in each economy.