Question

Suppose in a simple Keynesian economy, planned consumption function is given by C=250+0.65(Y-T). Planned investment, government purchases, taxes are $100 million, $100 million and $150 million respectively. What is MPC, MPS and autonomous consumption Derive the saving function. What is the equilibrium level of income? Y= AD=C+I+G If government purchases increase to $150 million, what is the new equilibrium level of income? What level of government purchases is needed to achieve an income of $2000 million? From question e) you get the newly government purchase. Now find out the multiplier value What is the amount of shift in AD curve? [Use the multiplier value from (5)]

          Suppose in a simple Keynesian economy, planned consumption function is given by C=250+0.65(Y-T). Planned investment, government purchases, taxes are $100 million, $100 million and $150 million respectively.
What is MPC, MPS and autonomous consumption
Derive the saving function.
What is the equilibrium level of income? Y= AD=C+I+G
If government purchases increase to $150 million, what is the new equilibrium level of income?
What level of government purchases is needed to achieve an income of $2000 million?
From question e) you get the newly government purchase. Now find out the multiplier value
What is the amount of shift in AD curve? [Use the multiplier value from (5)]

Added by Alejandra M.

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