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Graph planned expenditure as a function of income

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Reference no: EM132512155

In the Keynesian cross model, assume that the consumption function is given by C = 120 + 0.75 (Y - T).

Planned investment is 100; government purchases and taxes are both 100.

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? What is the multiplier for government purchases?

d. What level of government purchases is needed to achieve an income of 1600? (Taxes remain at 100.)

e. Show your results for b, c, and d in your graph.

Reference no: EM132512155

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