1. Suppose that initially equilibrium was 200 units and that this was also full employment level of income. Assume the consumption is C = 25 + 0.8YD, and that, from this level, we now have a decline in investment of 8 units. What will be the new level of income? What increase in government spending would be needed to restore income to its initial equilibrium level of 200 units?

2. In the above question, assume that, begining from the initial equilibrium position investment equals 100, government expenditures equals 75, and net taxes are fixed at 100, there is an autonomous decline in consumption and an increase in savings such that the new consumption function is C = 5 + 0.8YD.
a) Find the change in income resulting from this autonomous increase in savings. Explain why this change occured.
b) Calculate the level of savings before and after the shift in consumption and, therefore, the savings function. How do you explain this result?

Solution Summary

Calculate the level of savings before and after the shift in consumption and, therefore, the savings function. How do you explain this result?

... Part a - Calculate Equilibrium Income (Y) Part b - Calculate Consumption (C) Part c - Calculate Taxes (T) Part d - Calculate Net Imports (X - M). ...

... What is the new equilibrium level of Y ... Economic output calculations involving marginal propensity to ... 1. AGGREGATE PLANNED OUTPUT/INCOME CONSUMPTION INVESTMENT ...

... based on the National Income Accounting, and ask for calculation and derivation of of Aggregate Demand (AD), multiplier, equilibrium level of income, IS curve ...

... and state what will happen to the market equilibrium price and ... c. Consumer incomes fall, and the good is inferior ... function is: Q=30-3p, then calculate the price ...

A tutorial that explains how to calculate the Equilibrium price of a product, cross price elasticity of demand, Income elasticity of Demand and Elasticity of ...

... Plugging in the formula we get Year 1: 969 = GNP @Factor ... Year 5: National Income = 1530 - 150 = 1380 ... the following graph, and determine the equilibrium level of ...

... Using the Keynesian Cross model diagram and equation, critically and briefly ... The model identifies equilibrium aggregate production and income as the ...

... The LM curves shows that equilibrium income in the money market increases by 50 ... Problem 1 Suppose that the equation for autonomous planned spending, Apr is Ap ...