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.
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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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C

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

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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