Consider an economy in which taxes, planned invest-ment, government spending on goods and services,and net exports are autonomous, but consumption and planned investment change as the interest rate changes. You are given the following information concerning autonomous consumption, the marginal propensity to consume, planned investment, government purchases of goods and services, and net exports:
(a)Compute the value of the marginal propensity to save.
(b)Compute the amount of autonomous plannedspending,Ap,given that the interest rate equals 3.
(c)Compute the equilibrium level of income, giventhat the interest rate equals 3.
(d)Suppose that autonomous consumption changesby 4 percent for any change in household wealth and that the decline in the housing market from 200609 and the drop in stock market from 200709 reduce household wealth by $3 trillion. Compute the decline in consumption that results from the decline in household wealth.
(e)Calculate the new amount of autonomous plannedspending,Ap,and the new equilibrium level of income.