a) What is the consumption function? Assume that it takes the standard form (C = a + b YD).
b) Fill in the table above.
c) What is the equilibrium output level?
d) If the current output level is 15,000, what would likely happen to the output level next year? Why?
e) By how much will the equilibrium output level increase (decrease) if the planned investment falls by 500?
f) By how much will the equilibrium output level increase (decrease)if the tax (T) decreases by 400?
g) By how much will the equilibrium output level increase (decrease) if the government spending (G) decrease by 800?
h) By how much will the equilibrium output level increase (decrease) if the government spending (G) decrease by 300 and at the same time, the government cuts taxes by the same amount of 300?
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Income (Y)
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Net Tax (T)
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Disposable Income (YD)
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Consumption (C)
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Saving (S)
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Investment (I)
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Gov. Spending (G)
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TE
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10,000
|
1,000
|
|
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1,300
|
2,000
|
1,500
|
|
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12,000
|
1,000
|
|
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1,700
|
2,000
|
1,500
|
|
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13,000
|
1,000
|
|
|
|
2,000
|
1,500
|
|
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15,000
|
1,000
|
|
|
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2,000
|
1,500
|
|
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16,000
|
1,000
|
|
|
|
2,000
|
1,500
|
|
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18,000
|
1,000
|
|
|
|
2,000
|
1,500
|
|
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20,000
|
1,000
|
|
|