Question Solved1 Answer 3. Consider the following consumption function: \( C=200+0.75\left(Y_{D}\right) \). Here \( C \) is consumption, autonomous spending is 200 , the MPC is \( 0.75 \), and disposable income is \( Y-T=Y_{D} \). a. Construct a Keynesian Cross Diagram, graphing the consumption function. b. Determine and graph the level of equilibrium income. c. What happens if autonomous spending increases to 300 ? Show on your graph and solve for the new equilibrium income.

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Transcribed Image Text: 3. Consider the following consumption function: \( C=200+0.75\left(Y_{D}\right) \). Here \( C \) is consumption, autonomous spending is 200 , the MPC is \( 0.75 \), and disposable income is \( Y-T=Y_{D} \). a. Construct a Keynesian Cross Diagram, graphing the consumption function. b. Determine and graph the level of equilibrium income. c. What happens if autonomous spending increases to 300 ? Show on your graph and solve for the new equilibrium income.
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Transcribed Image Text: 3. Consider the following consumption function: \( C=200+0.75\left(Y_{D}\right) \). Here \( C \) is consumption, autonomous spending is 200 , the MPC is \( 0.75 \), and disposable income is \( Y-T=Y_{D} \). a. Construct a Keynesian Cross Diagram, graphing the consumption function. b. Determine and graph the level of equilibrium income. c. What happens if autonomous spending increases to 300 ? Show on your graph and solve for the new equilibrium income.
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