Consider an economy like the U.S., only with all planned spending categories in round numbers:

- I--business investment spending--$3 trillion/year
- G--government purchases--$3 trillion/year
- X--exports--$3 trillionyear
- C--consumption spending on domestically-producted commodities--C = c
_{0}+ c_{y}(Y-T_

And suppose that the economy starts out in equilibrium with E = Y, with c_{0} = 0 and c_{y} = 0.6:

What is the initial level of total planned expenditure E equals income and production Y?

Suppose c

_{0}= 0 rises to $3 trillion. After the economy attains its new equilibrium with E = Y, what is E = Y?Suppose c

_{y}= 0.6 falls to 0.4. After the economy attains its new equilibrium with E = Y, what is E = Y?

￼4. Return to c_{0} = 0 and c_{y} = 0.6. Suppose that I rises from $3 trillion to $4 trillion. After the economy attains its new equilibrium with E = Y, what is E = Y?

Return to c

_{0}= 0 and c_{y}= 0.6. Suppose that G rises from $3 trillion to $3.5 trillion. After the economy attains its new equilibrium with E = Y, what is E = Y?Return to c

_{0}= 0 and c_{y}= 0.6. Suppose that taxes T rise $3 trillion to $4 trillion. After the economy attains its new equilibrium with E = Y, what is E = Y?Return to c

_{0}= 0 and c_{y}= 0.6. Suppose that exports X fall from $3 trillion to $2.5 trillion. After the economy attains its new equilibrium with E = Y, what is E = Y? "

## Recent Comments