In the Keynesian-cross analysis, if the consumption function is given by C = 100 + 0.6(Y - T), and planned investment is 100, G is 100, and T is 100, then equilibrium Y is:
A)350.
B)400.
C)600.
D)750.

Question

Quizplus · Accepted Answer

In the Keynesian-cross model, equilibrium output (Y) is where planned expenditure equals actual output. The planned expenditure is C + I + G. Substituting the given values: C = 100 + 0.6(Y - 100), I = 100, G = 100. So, planned expenditure = 100 + 0.6(Y - 100) + 100 + 100. Setting this equal to Y and solving gives Y = 600.

In the Keynesian-Cross Analysis, If the Consumption Function Is Given