## Principles of Economics: Problems: Income-Expenditure Framework: Equilibrium

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

- I--business investment spending--determined by business executives' "animal spirits"--$3 trillion/year
- G--government purchases--determined by politics--$3 trillion/year
- T--net taxes and transfers--determined by politics--$3 trillion a year
- X--exports of goods and services--determined by foreigners--$3 trillion/year
C--consumption spending on domestically-produced commodities--determined by households according to the equation: C = c

_{0}+ c_{y}(Y - T)Suppose c

_{0}= 0 and c_{y}= 0.6 and suppose that the economy is in equilibrium with E = Y. What is total planned expenditure E = C + I + G + X?Suppose c

_{0}= $3 trillion and c_{y}= 0.4 and suppose that the economy is in equilibrium with E = Y. What is total planned expenditure E = C + I + G + X?Suppose c

_{0}= $3 trillion and c_{y}= 0.6 and suppose that the economy is in equilibrium with E = Y. What is total planned expenditure E = C + I + G + X?Suppose c

_{0}= 0 and c_{y}= 0.4 and suppose that the economy is in equilibrium with E = Y. What is total planned expenditure E = C + I + G + X?