Name:________________________________
Economics 121 A & B
Fall 1996 - Prof. Becker
Suppose that the aggregate consumption function in a simple model of national income determination is given by the equation:
Suppose that we also know that equilibrium national
income is 2500.
1. Put names, numerical values, and arrowheads on
the lines in the circular flow diagram at the right.
2. Show the equilibrium graphically on the grid provided.
(Show the "Keynesian cross.")
3. If planned investment increases by 100, will
savings rise or fall? Show the effect on the graph.
