Consider a Keynesian consumption function with desired consumption equal to 0.9 Y, where Y is income. Government purchases are $1000, net exports are zero, and desired investment varies with real interest rate according to the following schedule:
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Assume the interest rate adjusts so that the economy gets to equilibrium. Equilibrium output at full employment is $50,000. Find the values of consumption, investment, and the real interest rate at full-employment equilibrium.

Question

Consider a Keynesian consumption function with desired consumption equal to 0.9 Y, where Y is income. Government purchases are $1000, net exports are zero, and desired investment varies with real interest rate according to the following schedule:
‪  
Assume the interest rate adjusts so that the economy gets to equilibrium. Equilibrium output at full employment is $50,000. Find the values of consumption, investment, and the real interest rate at full-employment equilibrium.

Quizplus · Accepted Answer

The Answer of Consider a Keynesian consumption function with desired consumption equal to 0.9 Y, where Y is income. Government purchases are $1000, net exports are zero, and desired investment varies with real interest rate according to the following schedule:
‪  
Assume the interest rate adjusts so that the economy gets to equilibrium. Equilibrium output at full employment is $50,000. Find the values of consumption, investment, and the real interest rate at full-employment equilibrium.

Consider a Keynesian Consumption Function with Desired Consumption Equal to 0.9