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SECTION II (20 marks): Answer all parts of the question. When you answer using a diagram, explain and label the axes carefully. Answers must be given in the space provided below each question. Please show all working for each part of the question. An economy is described by the following equations: C = 500 + 0.85(Y – T), C is consumption, Y is income and T is taxation M=0.05Y Imports I P = 1500, planned investment G = 400, government spending T = tY, t = 0.2 is the marginal tax rate and exogenous taxes,
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