Question: Assume that the consumption function is given by C = 200 + 0.5( Y - T ) and the investment function is I = 1,000

Assume that the consumption function is given byC= 200 + 0.5(Y-T) and the investment function isI= 1,000 - 200r, whereris measured in percent,Gequals 300, andTequals 200.

(a) What is the numerical formula for theIScurve? Write theIScurve in two ways, expressingYas a function ofrandras a function ofY.

(b) What is the slope of theIScurve?

(d) IfGincreases, does theIScurve shift? If yes, explain the direction of the shift.

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