AE = C + I + G + (X-M)
C = 700 + .75(Y - T) - 30 (r)
I = 500 - 50(r)
G = 250
X- M = -25
T = 80
r = 5
Price level P is fixed at 1 (P=1)
Suppose the Consumption function changes to C=600 +.75(Y-T) - 30(r).
1)The new value of equilibrium output is =
2)The new value of equilibrium consumption is=
3)The Consumption function is still C=600 +.75(Y-T) - 30(r). The Keynesian spending multiplier in this economy =