Question

Suppose the consumption function is given by C = 100 + 0.75(Y-T). Investment is 50, government expenditure is 200, taxes are 250.

1. What is the marginal propensity to consume in this case? What does it mean economically (1 points)
2. What are the autonomous components here? (0.5 point)
3. What is the equilibrium income? Also, calculate consumption.  (1 point)
4. Draw a labelled graph to show the equilibrium income.  (1.5 points)
5. Suppose investment spending increases to 100. What is the effect of this change on equilibrium? You have to include a mathematical answer, and also show what happens in a graph. Write in words, how the economy goes from initial to new equilibrium. (2 points)
6. What is the value of the investment multiplier? (It works similar to the government expenditure multiplier) Interpret the economic meaning of the multiplier here. (1 points)

please very clear

Answer 1