### What is the new equilibrium income

##### Reference no: EM13832910

Suppose the consumption behavior in problem 1 changes so that C=100+0.9Y, while I remains at 50.

A. Is the equilibrium level of income higher or lower than it was in problem 1(a)? Calculate the new equilibrium level, Y’, to verify this.

B. Now suppose Investment increases to I=100, just as in problem 1(d). What is the new equilibrium income?

C. Does the change in investment spending have more or less of an effect on Y than it did in problem 1? Why?

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