Question: In an economy with no government and no foreign sectors, autonomous consumer spending is $250 billion, planned investment spending is $350 billion, and the marginal propensity to consume is 2/3.
a. Plot the aggregate consumption function and planned aggregate spending.
b. What is unplanned inventory investment when real GDP equals $600 billion?
c. What is Y*, income-expenditure equilibrium GDP?
d. What is the value of the multiplier?
e. If planned investment spending rises to $450 billion, what will be the new Y*?