2. Consider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the...

 

 

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2. Consider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the equation C = 200 + 2/3(YT). Planned investment, government spending and taxes all equal is 300. 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? (6POINTS) b. Calculate equilibrium Y. (4POINTS) c. How much does equilibrium income decrease when G is reduced to 200? What is the multiplier for government spending? (6POINTS) 2. Consider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the equation C = 200 + 2/3(YT). Planned investment, government spending and taxes all equal is 300. 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? (6POINTS) b. Calculate equilibrium Y. (4POINTS) c. How much does equilibrium income decrease when G is reduced to 200? What is the multiplier for government spending? (6POINTS)