From (c) Y = C+I+G
or, Y = 150+0.7(Y-T)+100-10r+50
or, Y(1-0.7) = 150-35+100-10*5+50
or, 0.3Y = 215
or, Y = 651.5
e) Now, plotting planned expenditure on the vertical axis and income on horizontal axis,
we can construct the planned expenditure on Keynesian cross as shown below in the diagram,
f) If G increases to 125,
Y = 150+0.7(Y-50)+100-10r+125
or, Y(1-0.7) = 150-35+100-10*5+125
or, 0.3Y = 290
or, Y = 966.67
g) Government multiplier = 1/(1-0.7) = 1/0.3 = 3.33
h) If T decreases by 25,
Y = 150+0.7(Y-25)+100-10r+50
or, or, Y(1-0.7) = 150-17.5+100-10*5+50
or, 0.3Y = 232.5
or, Y = 775
please answer question e to h. Question ? In the Keynesian cross, assume that the consumption...
Question ? In the Keynesian cross, assume that the consumption function is given by C-15007(Y-) Planned inve s -100-10 Government purchases and as we both 0. Graph consumption as function of income Graph investimentas function of the real estate 6. Suppose that the real interest rate is 5. Write the equation of the planned expenditure d. Suppose that the real interest rate is 5. What is the equilibrium level of income? . Using the equation of the planned expenditure in...
please answer part h to part k Question 2 In the Keynesian cross, assume that the consumption function is given by C = 150 +0.7 (Y-T) Planned investment is: I = 100 - 10 *r Government purchases and taxes are both 50. a. Graph consumption as function of income. b.Graph investment as function of the real interest rate. c.Suppose that the real interest rate is 5. Write the equation of the planned expenditure. d.Suppose that the real interest rate is...
Question 2 In the Keynesian cross, assume that the consumption function is given by C = 150 +0.7 (Y-T) Planned investment is: I = 100 – 10 *r Government purchases and taxes are both 50. a. Graph consumption as function of income. b. Graph investment as function of the real interest rate. c. Suppose that the real interest rate is 5. Write the equation of the planned expenditure. d. Suppose that the real interest rate is 5. What is the...
Question 2 In the Keynesian cross, assume that the consumption function is given by C = 150 +0.7 (Y-T) Planned investment is: I = 100 - 10 *r Government purchases and taxes are both 50. a. Graph consumption as function of income. b.Graph investment as function of the real interest rate. c.Suppose that the real interest rate is 5. Write the equation of the planned expenditure. d.Suppose that the real interest rate is 5. What is the equilibrium level of...
Question 2 In the Keynesian cross, assume that the consumption function is given by c-150+0.7(Y-T Planned investment is: I-100-10 Govemment purchases and taxes are both so. Graph consumption as function of income a b. Graph investment as function of the real interest rate. Suppose that the real interest rate is 5. Write the cquation of the planned expenditure. d. Suppose that the real interest rate is 5. What is the equilibeium level of income? Using the oquation of the plannod...
4. Keynesian cross and Keynesian multiplier: In the Keynesian cross, assume that the consumption function is given by C - 100 +0.5 (Y-T) Planned investment is 75; government purchases and taxes are both 100. a) Graph planned expenditure as a function of income. b) What is the equilibrium level of income? c) If government purchases increase to 110, what is the new equilibrium income? d) How big is the Keynesian government purchases multiplier in this example? e) What level of...
2. Chapter 11, The Keynesian Cross (5 points): • In the Keynesian cross, assume that the consumption function is given by: C = 200 +0.75(Y - T) Planned investment is 100, government purchases and taxes are both 100. (a) Graph planned expenditure as a function of income. (b) What is the equilibrium level of income? (c) If government purchases increase to 125, what is the new equilibrium income? (d) What level of government purchases is needed to achieve an income...
In the Keynesian cross, assume that the consumption function is given by C=200+0.75 (Y-T) Planned investment is 100; government purchases and taxes are both 100. a. Graph planned expenditure as a function of income. b. What is the equilibrium level of income?
In the Keynesian cross, assume that the consumption function is given by C=200+0.75(Y-T) Planned investment is 100; government purchases and taxes are both 100. a) Graph planned expenditure as a function of income. b) What is the equilibrium level of income? c) If government purchases increase to 125, what is the new equilibrium income? d) What level of government purchases is needed to achieve an income of 1,600?
Aggregate Demand I - Work It Out Question 1 In the Keynesian cross model, assume that the consumption function is given by C = $70 +0.7(Y – T) Planned investment is $200; government purchases and taxes are both $100. a. Place points A and B to graph planned expenditure as a function of income. Y=PE 1,500 1.450 1.400 1.350 1.300 1.250 1,200 1,150 1.100 1,050 9.000 950 850 Planned Expenditure 250 500 750 1,000 Income, Expenditure 1,250 1,500 b. Calculate...