In the Keynesian cross, assume that the consumption function is given by
C = 200 + .9 (Y-T).
a. Graph planned expenditure as a function of income.
b. What is the equilibrium level of income?
c. If government purchases increase to 125, what is the new equilibrium income?
d. What level of government purchases is needed to achieve an income of 1,600?
Please see attachment.
Planned or Aggregate Expenditure = AE = C + I + G, where
C = Consumption Function
I = Planned Investment
G = Government Purchases
C = 200 + .9 (Y-T), where Y = ...
Planned and aggregate expenditure is reviewed.