2. In the Keynesian cross, assume that the consumption function is given by C = 200 +...

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2. 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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Macroeconomics

ISBN: 9781429218870

7th Edition

Authors: N. Gregory Mankiw

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Question Posted: Sep 27, 2024 09:00 AM

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