A decrease in government spending reduces output more in the Keynesian Cross model than in the IS‐LM model. Explain why this is true.
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A decrease in government spending reduces output more in the Keynesian Cross model than in the...
Q2. In the Keynesian cross model, equilibrium in the economy is obtained where planned spending equals actual spending. (a) Explain what planned spending and actual spending are (b) Graphically present the equilibrium condition of the economy in the Keynesian cross model. (c) Explain how the economy adjusts to equilibrium if the economy finds itself with a level of planned spending which is less than actual spending (3 marks) (d) Explain why an increase in government spending leads to a greater...
a) Using the Keynesian cross model where the goods market equilibrium is determined and analyzed, graphically derive the IS curve, and explain each step. Explain what the equilibrium in the goods market implies for the IS curve, i.e., why is the IS curve downward sloping. Also, explain what causes shifts in the IS curve b) First, based on the analysis of the financial market equilibrium, graphically derive the LM curve. Explain what the LM curve is and explain in detail...
Consider the Keynesian cross. If output is greater than planned spending, then A) firms will raise production B) GDP will fall as the market corrects itself over time C) firms will likely hire new workers D) economic investment will rise
Estimating the Effect of Fiscal Policy on Output Suppose an economist finds that government spending is negatively correlated with output growth. That is, in periods in which government spending is greater than normal that output growth is, on average, relatively low and in periods in which government spending is less than normal that output growth is, on average, relatively high. Should we take this as evidence against a Keynesian model in which an increase in government spending leads to an...
4. In the Keynesian-cross model with an MPC > 0, if government purchases increase by 250, then the equilibrium level of income: A) increases by 250. B) increases by more than 250. C) decreases by 250. D) increases but by less than 250.
In the Keynesian model, the relationship between the multiplier and the change in government spending is as follows: change in government spending = multiplier change in total spending in the economy multiplier change in government spending change in total spending in the economy change in government spending + change in total spending in the economy multiplier change in government spending/multiplier - change in total spending in the economy
In the Keynesian-cross model, if the MPC equals 0.75 then a $2 billion increase in government spending increases the equilibrium level of income by __________. A) $1 billion. B) $3 billion. C) $4 billion. D) $2 billion.
When considering a change in government spending in the traditional Keynesian model , which of the following expenditures is considered an offset to government spending? A. Investment. B. Net exports. C. Consumption. D. None of these above are considered offsets.
While traditional Keynesian analysis indicates that increases in government purchases are a more potent tool than decreases in taxes to stimulate the economy, what are some of the reasons why tax cuts might be preferred to increased government spending?
Using IS-LM, graph and explain the effects of a reduction in government spending of $800 trillion dollars and a MPC of .75. Make sure to include the Money graph and the Keynesian Cross