1.
What is the relationship between consumption and the following economic variables:
household income, wealth, household's expectations about the future, and interest
rates?
2.
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.
3.
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.
4.
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?

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5.
Suppose an economy is initially in equilibrium at $800 billion and investment increases
by $10 billion. This causes the economy to expand to $1200 billion. Calculate the
value of the multiplier.
6.
Please explain the "paradox of thrift”
7.
Assume the following behavioral equations for a macroeconomy:
C = 100 + .9Y
d
, I = 50, T = 100 and G = 40
(a) Calculate the equilibrium level of output.
(b) Given the information, calculate the level of consumption that occurs at the
equilibrium level of income.
(c) Suppose government spending
increases by 100. Calculate the new equilibrium
level of income.
8.
Assume the following behavioral equations for a macroeconomy:
C = 200 + .8Y
d
, I = 200, T = 200 and G = 500