Macroecon: Decrease in autonomous investment?

Question

Starting with a full employment level of income assume that there is a decrease in autonomous investment. From both a Keynesian (Keynesian cross) and Non-Keynesian perspective, please describe what happens to

(1) Consumption

(2) Saving

(3) Output

(4) Interest Rates

(5) Unemployment

Thank you.

Answer 1

All depends on where this decrease will go (I will assume that it just evaporates) for Keynesian model:

(1) Consumption as function of output will fall, because GDP will fall Y=C+I+G+NX

(2) Saving will fall too because of simplification S=I (for closed economy)

(3) Output - will fall because it is sum of components including investment.

(4) Interest Rates - lower demand for investment will lead to lower equilibrium interest rate.

(5) Unemployment - will increase because of lower output.