QUESTION 1 10 points Private consumption Cin a small closed economy can be described by the expression C-8 (45) Y stipulating its dependence of C on aggregne output and investment by the private sector is iP-8 while government purchases and net exports are zer (0) Obtain autonomous consumption, the marginal propensity to consume (MPC), the spending multiplier (m, the equilibrium GOP and private savings 5 for this y (you may need to draw a consumption table for Y levels 0, 10, 20,100 60 Firms anticipate a decrease in sales due to the pandemic so they decide to downsize by reducing planned investment spending to what will happen to GDP and to private savings? (i) The contraction in economic activity described in (10 translates into increased unemployment and generalized household indebiness. In order to restore Seancial heath by increasing private savings, the government promotes austerity from the part of the population. People responds by reducing autonomous consumption from 8 to & What will happen to the equilibrium GDP and to private savings as a consequence of this behavioral change? Obtain the new values of Y and 5 as part of your answer (iv) Comparing () and (ii), can you conclude that the austerity drive has contributed to restore private savings to their initial level? Explain why. (v) Using a single graph, describe the equilibriun GDP corresponding to the scenarios described in parts (0.00) and (s. You may attach a picture of the graph to an email and send it to gustavo.rodriguez@liu.edu with subject: "ECO 1-Midterm For the toolbar, press ALT+F10 (PC) or ALT+FN+F10 (Mac) B I US Paragraph B Arial XX 8 V 14px 0) EM Ex A I. Xa www 5 v 10 + Save Al Answers Save and Submit