What is the value of the equilibrium level of income for the data given below for an economy? c = 50 +…

With a 20% tax rate, disposable income is $Y_d = 0.8Y$, so consumption is $C = 50 + 0.8(0.8Y) = 50 + 0.64Y$. In equilibrium $Y = C + I + G = 50 + 0.64Y + 100 + 30$, so $0.36Y = 180$ and $Y = 500$. Leaving out the tax would make the multiplier 5 and give an income of 900, so the tax rate must be applied first.