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1. Consider an economy described by the following equations: Consumption C = 130 + 0.5(Y -T) Investment / = 100 Government spending G = 100
1. Consider an economy described by the following equations: Consumption C = 130 + 0.5(Y -T) Investment / = 100 Government spending G = 100 Taxes: T = 100 With these data and using the Keynesian cross, answer the questions below: a) Find the equilibrium values for GDP, consumption, private savings and public savings. Graph the equilibrium and check whether the equation relating financing need/capacity of the different sectors holds. b) Assume that investors' confidence about the future of the economy is high and investment becomes / = 200. Graph the new situation for each of the fiscal scenarios. What changes in the graphs now? How much does equilibrium income change
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