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1)     An economy is in equilibrium at a national income level of $6000m

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1)     An economy is in equilibrium at a national income level of $6000m. Due to a recent crisis savings are at a level of $2400m.

Draw and fully label neatly the equilibrium level circular flow diagram.

2)      If there is an increase in investment in one cycle of $800 and the propensity to save does not change then track the impact of this change through 3 cycles and show on the diagram.

3)     Explain what is happening to the original injection during these cycles.

4.     Use the multiplier to calculate the national income when the macroeconomy will eventually return to equilibrium. Show all workings and explain all terms used