1. Assume consumption is represented by the following: C = 400 + .5Y. Also assume that planned investment (I) equals 100.

(a) Given the information, calculate the equilibrium level of income.

(b) Given the information, calculate the level of consumption and saving that occurs at the equilibrium level of income.

(c) Write out the saving function for this economy. What is the marginal propensity to save?

2.Draw a circular flow diagram with households and firms and with government. Label the markets and the flows in the circular flow diagram.

3.Using the figures below calculate GNP, NNP, National Income, Personal Income and Disposable income.

Consumption Expenditure 6,258

Investment 1,623

Government Expenditure on goods & services 1,630

Exports of goods & services 998

Imports of goods & services 1,252