## Principles of Economics: Problems: Income-Expenditure Framework: Comparative Statics

Consider an economy like the U.S., only with all planned spending categories in round numbers:

• I--business investment spending--$3 trillion/year • G--government purchases--$3 trillion/year
• X--exports--$3 trillionyear • C--consumption spending on domestically-producted commodities--C = c0 + cy(Y-T_ And suppose that the economy starts out in equilibrium with E = Y, with c0 = 0 and cy = 0.6: 1. What is the initial level of total planned expenditure E equals income and production Y? 2. Suppose c0 = 0 rises to$3 trillion. After the economy attains its new equilibrium with E = Y, what is E = Y?

3. Suppose cy = 0.6 falls to 0.4. After the economy attains its new equilibrium with E = Y, what is E = Y?

￼4. Return to c0 = 0 and cy = 0.6. Suppose that I rises from $3 trillion to$4 trillion. After the economy attains its new equilibrium with E = Y, what is E = Y?

1. Return to c0 = 0 and cy = 0.6. Suppose that G rises from $3 trillion to$3.5 trillion. After the economy attains its new equilibrium with E = Y, what is E = Y?

2. Return to c0 = 0 and cy = 0.6. Suppose that taxes T rise $3 trillion to$4 trillion. After the economy attains its new equilibrium with E = Y, what is E = Y?

3. Return to c0 = 0 and cy = 0.6. Suppose that exports X fall from $3 trillion to$2.5 trillion. After the economy attains its new equilibrium with E = Y, what is E = Y? "