You are given the following data concerning Freedonia, a legendary country: Consumption function: C = 250 +0.50Y • Investment function: I = 100 Aggregate expenditure function: AE = C +1 Equilibrium: AE = Y Describe the graph of the consumption function and the aggregate expenditure function, then identify the equilibrium level of income. The AE line is found by adding I to C. AE is The consumption function has an intercept of and a slope equal to MPC =[ equal to the MPC and an intercept of Equilibrium is achieved at Y = [ C with a slope
You are given the following data concerning Freedonia, a legendary country: Consumption function: C = 250 +0.50Y • Investment function: I = 100 Aggregate expenditure function: AE = C +1 Equilibrium: AE = Y Describe the graph of the consumption function and the aggregate expenditure function, then identify the equilibrium level of income. The AE line is found by adding I to C. AE is The consumption function has an intercept of and a slope equal to MPC =[ equal to the MPC and an intercept of Equilibrium is achieved at Y = [ C with a slope
Chapter8: The Keynesian Model
Section: Chapter Questions
Problem 6SQ
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ISBN:
9781337617383
Author:
Roger A. Arnold
Publisher:
Cengage Learning