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1) In the Keynesian cross, assume that the consumption function is given by C=200+0.75 (Y-T) Planned...

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

C=200+0.75 (Y-T)

Planned investment is 100; government purchases and taxes are both 100.

  1. Graph planned expenditure as a function of income.
  2. What is the equilibrium level of income?
  3. If government purchases increase to 125 (goes up by 25), what is the new equilibrium income?

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