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Suppose we investigate a particular example of a model with no government. Suppose the consumption function is given by C=100+.8Y, whereas investment is given by I=50.
a. What is the equilibrium level of income in this case?
b. What is the level of saving equilibrium?
c. If, for some reason, output is at the level of 800, what will the level of involuntary inventory accumulation be?
d. If I rise to 100, what will the effect be on the equilibrium level?
e. What is the value of the multiplier here?
f. Draw a diagram indicating the equilibrium in both parts a and d.
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Deficient as the sole mechanism for determining the optimal level of resource employment.
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While the population variances are unknown, we will assume they are equal.
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