In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75 (Y - T). Planned investment is 100; government purchases and taxes are both 100. a. Graph planned expenditure as a function of income. b. What is the equilibrium level of income? c. If government purchases increase to 125, what is the new equilibrium income? d. What level of government purchases is needed to achieve an income of 1,600?
In the Keynesian cross, assume that the consumption function is given by C = 200 + 0.75 (Y - T). Planned investment is 100; government purchases and taxes are both 100. a. Graph planned expenditure as a function of income. b. What is the equilibrium level of income? c. If government purchases increase to 125, what is the new equilibrium income? d. What level of government purchases is needed to achieve an income of 1,600?
Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?
Section: Chapter Questions
Problem 7TY
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In the Keynesian cross, assume that the consumption function is given by
C = 200 + 0.75 (Y - T).
Planned investment is 100; government purchases
and taxes are both 100.
a. Graph planned expenditure as a function of
income.
b. What is the equilibrium level of income?
c. If government purchases increase to 125, what
is the new equilibrium income?
d. What level of government purchases is needed
to achieve an income of 1,600?
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