How will firms react when they discover that their actual investment is less than their intended
investment? How will their reaction affect equilibrium national income?
2. Consider an economy where national income is $7,000, autonomous consumption is $1,000 and the MPC = 0.80. Explain what will happen to national income in the following three cases:
Case A: intended investment = $200
Case B: intended investment = $400
Case C: intended investment = $600
3. Consider an economy where Y = $3,500, C = $500 + (0.80Y), and where autonomous investment is equal
a.Is this economy in equilibrium? Explain.
b.What will happen if people try to increase their saving to $400?
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