Assume That Consumption Is Represented by the Following: C =

question 228

Essay

Assume that consumption is represented by the following: C = 200 + 0.9Y. Also assume that planned investment (I) equals 300.
(a) Now, suppose the level of income is equal to 4,000. What is the level of aggregate expenditures at this level of income? What is the value of any unplanned changes in inventories?
(b) Given the information, calculate the equilibrium level of income.
(c) Given the information, calculate the level of consumption and saving that occurs at the equilibrium level of income.
(d) Suppose planned investment falls by 100. Calculate the new level of equilibrium income.

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