Use the Keynesian Model to answer this set of questions. Suppose that in the economy under consideration the consumption function can be written as C=200+.8(Y-T). Furthermore, you know that taxes are autonomous and equal to $10. Now, suppose that investment spending is equal to $50 at every level of disposable income and government spending is constant and equal to $100 at every level of disposable income, suppose that (X-M) is constant and equal to $20 at every level of disposable income. (a)Draw a graph of the consumption function with respect to disposable income. Measure/show consumption spending on the vertical axis and disposable income on the horizontal axis (b) Calculate equilibrium national income Y, from the information given. (c) From the information given above is the government running a deficit or surplus budget? Explain why.

Use the Keynesian Model to answer this set of questions. Suppose that in the economy under consideration the consumption function can be written as C=200+.8(Y-T). Furthermore, you know that taxes are autonomous and equal to $10. Now, suppose that investment spending is equal to $50 at every level of disposable income and government spending is constant and equal to $100 at every level of disposable income, suppose that (X-M) is constant and equal to $20 at every level of disposable income. (a)Draw a graph of the consumption function with respect to disposable income. Measure/show consumption spending on the vertical axis and disposable income on the horizontal axis (b) Calculate equilibrium national income Y, from the information given. (c) From the information given above is the government running a deficit or surplus budget? Explain why.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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