Explain how the level of saving is determined in the simple Keynesian consumption function.

What is the effect of an increase in disposable income on the level of saving?

ii. Explain Keynes's theory of how expectations affect investment demand. How is this theory

related to Keynes's view that aggregate demand would be unstable in the absence of government stabilization policies?

iii. Suppose that government spending was increased by 20 units and that this increase was financed by a 20-unit increase in taxes. Would equilibrium income change or remain the same as a result of these two policy actions? If equilibrium income changed, in which direction would it move, and by how much? Explain.