Consider an economy whose marginal propensity to consume is c = 0.6 and taxes, T, are lump sum. Suppose that we observe a change AT = 100. Using the Keynesian cross (i.e. assume that real interest rates do not change), compute how that change affects private savings, public savings, total savings and investment.

Consider an economy whose marginal propensity to consume is c = 0.6 and taxes, T, are lump sum. Suppose that we observe a change AT = 100. Using the Keynesian cross (i.e. assume that real interest rates do not change), compute how that change affects private savings, public savings, total savings and investment.

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter18: The Keynesian Model

Section: Chapter Questions

Problem 5SQP

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