You are given the following information about the country X. The savings function with respect to output is given by S = -100 + 0.2Y.
T =Taxes = $50
G = Government Spending = $100
I = Investment Spending = $175
M – X = $125
Using the above information:
I. Derive the consumption function. II. Calculate the equilibrium level of output ans illustrate your answer graphically.
As the government spending increases to $150, calculate the new equilibrium level of output and illustrate it graphically.
