Suppose that the consumption function is give by C(Y ) = 700 + .68(Y ) , Planned investment is 500.

1. (a)Solve for the equilibrium level of income, and sketch the Keynesian cross. 10 points.
2. (b)What is the multiplier in this economy? 5 points.
3. (c)Using the multiplier, calculat the change in the equilibrium income that would result in consumers decide to reduce their spending by 120. 5 points
4. (d)Show this shift grpahically. 5 points.