This is a homework assignment....I just can\'t understand with theinfo given how

Question

This is a homework assignment....I just can't understand with theinfo given how to obtain the answers....hope you can help...

closed economy with no government
equilibrium condition is Y = C + I
MPS = 0.25
the autonomous part of C is $30
Investment is autonomous and equals $40

a)what is equilibrium level of national income using tableabove
b)at the equilibrium level of national income what will consumptionexpenditure be?
c)at the equilibrium level of national income what will the levelof saving be?

and obviously use the above info for all 3 parts.....thanks

Explanation / Answer

Did you forget to put in an expected income table? You cantfigure out C or I if you dont know what the expected is but ill gothrough it without it.
MPS + MPC = 1 .25 + MPC = 1 MPC = .75
The keynesian consumption function states that C = A +B(Y) with A = Autonomous consumption, B = MPC,and Y = Expected income so we get
C = 30 + .75(Y)
Savings which we can call Investment in this scenario since weare assuming money saved is going to be invested however that isnot always the case. Investment can be figure out by S = -A + B(Y)with A = Autonomous Savings, B = MPS, and Y = expectedincome so we get
S = .25(Y) - 40
Equilibrium Level of National Income can be figured out byfinding the 45 degree line that passes through the graph Once you know the equilibrium level of national income you cansubstitute it in for (Y) and you will be able to findconsumption and saving expenditure.

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