PRINCIPLES OF MACROECONOMICS
QUIZ #3 – COVERING CHAPTERS 8 AND 9
What is the relationship between consumption and the following economic variables:
household income, wealth, household's expectations about the future, and interest
Explain any differences between actual investment and planned investment. Also, is it
possible for actual investment to be greater than planned investment? If so, explain.
Assume consumption is represented by the following: C = 400 + .75Y. Also assume
that planned investment (I) equals 100. Given the information, calculate the
equilibrium level of income.
Assume that the saving function is S = - 100 + .1Y and planned investment is 40.
Calculate the equilibrium level of output using the leakages/injections approach. How
much would output contract by if planned investment fell by 10?