drawals into an economy affect its income and output? 6. Assume a simple Keynesian depression economy with a multiplier of 4 and an initial equilibrium $4,000. income of $3,000. Saving and investment equal $400, and assume full employment income is a. What is the MPC equal to? The MPS? b. How much would government spending have to rise to move the economy to full employment? C. Assume that the government plans to finance any spending by raising taxes to cover the increase in spending (it intends to run a balanced budget). How much will government spending and taxes have to rise to move the economy to full employment? d. From the initial equilibrium, if investment grows by $100, what will be the new equilibrium level of income and savings? 7. In modern politics, the word Keynesian often is synonymous with "big government" spending. Does this characterization accurately reflect the role of government in spurring economic activity? How would a tax cut be characterized today versus in Keynes's time? 8. Using the aggregate expenditures table below, answer the questions that follow. Income (Y), in US Dollars ($) Consumption (C) in US Dollars ($) Savings (S) in US Dolla 2,200 2,320 -120 2,300 2,380 -80 2,400 2,440 -40 2,500 2,500 0 2,600 2,560 40 2,700 2,620 80 2,800 2,680 120 2,900 2,740 160 3,000 2,800 200 a. Compute the APC when income equals $2,300 and the APS when income equals $2,800. b. Compute the MPC and MPS. C. What does the simple Keynesian multiplier equal? If investment spending is equal to $120, what will be equilibrium income? Generate a graph to show saving, investment, and equilibrium income