Daily Review -- Keynesian Cross

 It's getting election time and it's time to hear about all that the government can do to stimulate the economy.  In the table below, what is equilibrium?  Are inventories increasing or decreasing in equilibrium?  (Click to enlarge.)

Here is the equation I used for the consumption function and planned investment.  Y = 50 + .5Y

How much is the Marginal Propensity to Consume? How much is the multiplier?


The answers are below:

You will find that at GDP of 220 the economy is in equilibrium and inventories are neither increasing or decreasing.  The multiplier is 2 and the MPC is .5.  You should always graph your answer as shown below.