What is the equilibrium level of income

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In the Keynesian cross, assume that the consumption function is given by

C(Y - T) = 1225+0.75(Y - T)

The planned investment function isI (r) = 1700  - 120r  and government purchases and taxes are both 140.

a) Suppose r = 12. Graph the Keynesian cross where Y goes from 0 to 10,000. Be sure to label the axes and the planned expenditure function as PE0.

b) What is the equilibrium level of income? Show this on your graph as Y0.

c) On a different graph of the Keynsian cross where the Y -axis goes from 6,000 to 6,100. Be sure to label the axes and the planned expenditure function as PE0.

Reference no: EM131427950

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