Essay
Consider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the equation C = 200 + 2 / 3 (Y - T). Planned investment is 300, as are government spending and taxes.
a.If Y is 1,500, what is planned spending? What is inventory accumulation or decumulation? Should equilibrium Y be higher or lower than 1,500?
b.What is equilibrium Y?
c.What are equilibrium consumption, private saving, public saving, and national saving?
d.How much does equilibrium income decrease when G is reduced to 200? What is the multiplier for government spending?
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a.Planned spending is 1,600. Inventory d...View Answer
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