Suppose the consumption function is given by C = 100 + 0.8YD and that I = 50, while G=200, TR=62.5 and t=0.25. What is the equilibrium level of income? What is the level of saving in equilibrium? If investment were to rise to 150, what would be the effect be on equilibrium income.
Suppose the consumption function is given by C = 100 + 0.8YD and that I = 50, while G=200, TR=62.5 and t=0.25. What is the equilibrium level of income? What is the level of saving in equilibrium? If investment were to rise to 150, what would be the effect be on equilibrium income.
Chapter9: The Keynesian Model In Action
Section: Chapter Questions
Problem 5SQP
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Suppose the consumption function is given by C = 100 + 0.8YD and that I = 50, while G=200, TR=62.5 and t=0.25.
- What is the equilibrium level of income?
- What is the level of saving in equilibrium?
- If investment were to rise to 150, what would be the effect be on equilibrium income.
- What is the value of multiplier in part a. and c.
- Draw a diagram indicating the equilibrium in part a. and c.
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