Q3.

In the Keynesian Model assume the following information:

C=1000+0.5Y_d I=300 G=200 T=100 here Y_d=Y-T. Note that I, G, T, represents private investment, Government spending and Taxes, respectively.

a)What are: (i) the total injections and (ii) total leakages

b)What is the equilibrium level of income, consumption, and saving and disposable income

c)Assume that the level of output is 1200 how does the economy adjust to equilibrium, specifically mention inventory levels.

d)Suppose private investment will decrease by 150, by how much the government needs to change government spending to prevent output from changing.

Q4

In the Keynesian Model assume the following information:

C=1000+0.5Y_d I=300 G=200 T=100 here Y_d=Y-T+TR and TR=200. I, G, T, TR, represents private investment, Government spending, Taxes and Transfer payments, respectively.

a)Derive the Aggregate demand function

b)Is the government operating a surplus or deficit?

c)What is the equilibrium level of output, consumption, and saving and disposable income

d)Suppose Transfer payment changes by 100 by how much will equilibrium output change?