Consider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the equation C = 200 + MPC(Y - T). Planned investment (I) is 300, government spending (G) is 300 and taxes (T) is 300. Assume MPC is equal to 2/3.

(a)If Y is 1,500, what is planned spending? What is inventory accumulation or decumulation? Is equilibrium Y 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?