c,d,e,f **Planned Expenditure Function Question****Instructions:** Do all parts to the question (show your work).Assume in Macroland, MPC = 0.8, and autonomous consumption = $2000. Planned investment = $5000, and planned government purchases = $4000. All planned expenditures are autonomous expenditures. Taxes (T) is zero, and net exports = zero.a. Write out the consumption function b. What is induced consumption in this model? c. Write out the planned expenditure function (show your work) d. Calculate equilibrium real current GDP (income) (show your work) e. How much is the expenditure multiplier? f. If at the current level of equilibrium, the economy is experiencing an inflationary gap of $2000. How much is the full employment GDP? g. How much does planned investment change to close the inflationary gap? h. Graph the planned expenditure function. Show the change (shift) for a change in investment to close the gap. Show equilibrium points, full-employment GDP. Label all points clearly.

Definitions: The government's expenditure can be partitioned into two sections — plan and non-plan. Plan use is that part of government costs which helps increment the useful limit in the economy. It incorporates costs for various areas, like rural development and schooling. In contrast to non-plan consumption, which is generally fixed and compulsory in nature, plan use is important for Budget estimates determined after conversations with the services and partners concerned.(a) Consumption function = autonomous + induced consumption C = C + bY where b is MPC C = 2000+ 0.8y, where y is the National income (b) Induced consumption is 0.8y (c) Planned Expenditure is = Autonomous consumption expenditure + planned investment +planned government = 2000 + 5000+ 4000 = 11000 (d). Equilibrium real current GDP we know that, Real GDP = Y = 11000+ 0.8 Y 0.2Y = 11000 Y = 55000 (e ) Expenditure multiplier we know that it is 1/1-MCP =1/1-0.75 = 4 (f.) full employment GDP The actual GDP is 52000+4000= =$56000. Full unemployment =potential level of GDP which is 52000