Consumption at equilibrium level of income

Reference no: EM1314037

Assume consumption is represented by the following: C=200+0.9 Y. Also assume that planned investment (I) equals 300.

(a) Now suppose the level of planned income is equal to 4000. What is level of planned AE at this level of income? What is the value of any unplanned changes in inventories?

(b)Given the information, calculate the equilibrium level of income

(d) Suppose planned investment falls by 100. Graphically illustrate using the AE-Y graph the effects of this reduction in planned investment on the economy. Also calculate the new equilibrium level of income.

Reference no: EM1314037

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