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Unformatted text preview: Economics 302 Spring 2008 Homework #5 Homework will be graded for content as well as neatness, sloppy or illegible work will not receive full credit. This homework requires the use of Microsoft Excel. 1. Keynesian Cross Consider a closed economy with consumption given by the following equation. ( 29 2 100 ( ) 3 C Y T = +- In addition, suppose that planned investment expenditure is 300 and that the government runs a balanced budget with 200 in government spending. Use the Keynesian cross as a starting point to answer the following questions. a. If Y is 1,100, what is planned expenditure? What is the change in inventory level? Given your answer to the last question, would you expect equilibrium Y be higher or lower than 1,100? If you expect equilibrium Y to be different, explain the mechanism by which you would expect Y to change in this economy. b. What is equilibrium Y? c. What are the equilibrium levels of consumption, private saving, public saving, and national saving, based on the equilibrium level of output you just found?...
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