Assume that the consumption function is given by C = 200 + 0…
Assume that the consumption function is given by C = 200 + 0.7 (Y − T), the tax function is given by T = 100 + t1Y, and Y = 50K0.5L0.5, where K = 100 and L = 100. If t1 increases from 0.2 to 0.25, then consumption decreases by: