In the Keynesian cross model, assume that the consumption function is given by C=$170+0.7(Y-T) Planned investment is $100; government purchases and taxes are both $100.

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Chapter1: Making Economics Decisions
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Aggregate Demand I-Work It Out Question 1
In the Keynesian cross model, assume that the consumption function is given by
C-$170+0.7(Y-T)
Planned investment is $100; government purchases and taxes are both $100.
a. Place points A and B to graph planned expenditure as a function of income.
YPE
1,500
1,400
400
1350
1500
1.250
200
4350
1,100
1050
14.000
150
200
850
8800
25 790
700
650
600
550
Planned Expenditur
Transcribed Image Text:Aggregate Demand I-Work It Out Question 1 In the Keynesian cross model, assume that the consumption function is given by C-$170+0.7(Y-T) Planned investment is $100; government purchases and taxes are both $100. a. Place points A and B to graph planned expenditure as a function of income. YPE 1,500 1,400 400 1350 1500 1.250 200 4350 1,100 1050 14.000 150 200 850 8800 25 790 700 650 600 550 Planned Expenditur
1,050
15,000
950
900
850
& 800
750
700
8 650
600
550
500
450
400
350
300
250
200
150
250
b. Calculate the equilibrium level of income.
Y=$
500
750
1,000 1,250
Income, Expenditure
1,500
Transcribed Image Text:1,050 15,000 950 900 850 & 800 750 700 8 650 600 550 500 450 400 350 300 250 200 150 250 b. Calculate the equilibrium level of income. Y=$ 500 750 1,000 1,250 Income, Expenditure 1,500
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