Questions:
For problems 1-6, assume that autonomous consumption = $400, MPC = 0.75 and intended investment = $900.?
1. Write down the consumption function given the above information.
2. Determine the level of consumer spending and the level of savings, if the national income is $4500. Please remember to show your work.
3. What is the level of consumer spending that the firms are expecting, if the national income is $4500. Please show your work. Hint: Y= C+Ii
4. Is the economy in equilibrium? Why or why not?
5. Solve for the equilibrium level of national income, using the formula Y= C+I