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Suppose, the closed private economy is described by the following equations: C = 70 0.75Y and Ip =1 = 80. (* Defense pis gap it
Suppose, the closed private economy is described by the following equations: C = 70 0.75Y and Ip =1 = 80. (* Defense pis gap it in his bony, it i emplome in ord or our is iS pain and give your calculations. Show the situation on the graph in (AE - ") space. According to Keynes' theory, what can be done in practice (real economy) to improve the situation? Explain. (b) Define what type of gap exists in this economy, if the full-employment level of output is 540. What is the cause for this gap and what must be undertaken in the economy in order to overcome it? Explain and give your calculations. Show the situation on the new graph in (AE - Y) space. Instruction: All the lines, all the points and all the slopes of the lines on all of your graphs must be signed with the corresponding figures (numbers) from the statement of the problem and from your calculations
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