1. In each of these cases, how much saving is there in equilibrium? (Hint: Income not consumed must be saved.) Is saving equal to investment? 2. Fredonia has the following consumption function: C...

1. In each of these cases, how much saving is there in equilibrium? (Hint: Income not consumed must be saved.) Is saving equal to investment?

2. Fredonia has the following consumption function: C 5 100 1 0.8DI Firms in Fredonia always invest $700 and net exports are 0, initially. The government budget is balanced with spending and taxes both equal to $500. a. Find the equilibrium level of GDP. b. How much is saved? Is saving equal to investment? c. Now suppose that an export-promotion drive succeeds in raising net exports to $100. Answer (a) and (b) under these new circumstances.