Assume That Consumption Is Represented by the Following: C =

question 175

Essay

Assume that consumption is represented by the following: C = 400+ 0.75Y. Also assume that investment (I) equals 100.
(a) Given the information, calculate the equilibrium level of income.
(b) Given the information, calculate the level of consumption and saving that occurs at the equilibrium level of income.
(c) Suppose investment increases by 100. Calculate the new equilibrium level of income.
(d) Will the level of saving and consumption change as the economy adjusts to this change in investment? Explain.

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Definitions:

Readiness-To-Change Scale Question

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