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Assume the following keynesian income-expenditure

Assume the following Keynesian income-expenditure two-sector model:

AD = C_p + I_p

C_p = C_o + c .Y

I_p = I_o

where AD is aggregate demand; C_p is planned consumption; I_pis planned investment; C_ois exogenous consumption; c is the marginal propensity to consume; Y is the level of income (and output); and I_o is exogenous investment.

(a) What is the relationship between the 'marginal propensity to consume' and the 'average propensity to consume'?

(b) What is equilibrium Y in terms of C_o, c and I_o?

(d) What does this model assume about aggregate supply and the general price level?

(e) Represent this model in a 45^? cross-diagram and illustrate the equilibrium level of income.

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Business Management: Assume the following keynesian income-expenditure

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