) increase by $160.

MACROECONOMICS FOR TODAY
10th Edition
ISBN:9781337613057
Author:Tucker
Publisher:Tucker
Chapter8: The Keynesian Model
Section: Chapter Questions
Problem 2SQP
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Suppose we have the following information for the simple (fixed r, fixed P, fixed W) Keynesian model.

 

            C = 400 + 0.8                                            I = 310

                                                                              G = 140

               = 400 + 0.8 (Y - T)                                T = 200,

 

            where C is the consumption function, (Y - T)  is disposable income, I is investment, G is government spending, and T is taxes

If (disposable income) increased by $200, C would

Group of answer choices
A) increase by $160.
B) increase by $150.
C) increase by $135.
D) decrease by $40.
E) increase by $200.

 

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