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 increase in income
Q2. In the Keynesian cross model, equilibrium in the economy is obtained where planned spending equals...
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.
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
please explain? 1) In the closed economy Keynesian-cross model, a decrease in the interest rate _ planned investment spending and _ the equilibrium level of income. A. decreases: increases B. increases; decreases _C. decreases: decreases _D. increases; increases 2) Exhibit: Steady-State Consumption, Production and Depreciation Function c*, * , ** The Golden Rule level of the capital-labor ratio is: A k*A. B. above k*A but below k*B. _C. k*B. D. above k*B
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...
1. Use the Keynesian cross model and show graphically in which direction will equilibrium level of income (or output) change. For each of the following, write down the formula for the size of the change of income (i.e. write down the formula for ∆Y): (i) An increase in government purchases (ii) An increase in taxes (iii) An increase in government purchase and an increase in taxes of equal amount (Nb: You must draw a SEPARATE graph for parts (i) and...
For a real Keynesian model of a mixed economy with a marginal propensity to consume equal to .8 and autonomous consumption equals 600 billion, planned investment equals 100 billion, government spending equals 300 billion, and taxes equal 300 billion: a. Calculate the equilibrium level of Ye or real output. b. Draw a diagram that illustrates the equilibrium condition for the model, the equilibrium level of output, and the level of autonomous spending. Be sure to carefully label your diagram, including...
A decrease in government spending reduces output more in the Keynesian Cross model than in the IS‐LM model. Explain why this is true.
Question 1. Consider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the equation C= 200 + 2/3(Y-T). Planned investment is 300, as are government spending and taxes. (18 points) a. If Y is 1,500, what is planned spending? Should equilibrium Y be higher or lower than 1,500? (4 points) b. What is equilibrium Y? (Hint: Substitute the values of equations for planned consumption, investment, and government spending into the equation Y C+I+ G and then...
2. Assume the following Keynesian model: C = 400 + .75Yd I = 200 G = 100 X = 150 M = 50 + .15 Yd T = 100 a. Find the aggregate expenditure function b. Find the equilibrium level of GDP. c. Using a “Keynesian cross” (or 45-degree line) diagram, show graphically the equilibrium in part a). d. What is the spending multiplier in this model? Tax multiplier? e. Show that leakages are equal to injections at equilibrium. f....
Assume the following Keynesian model: AE = C + I + G + (X - M) C = 500 + .9Yd I = 300 G = 100 X = 150 M = 50 + .1 Yd T = 100 a. Find the equilibrium level of GDP. b. Using a “Keynesian cross” (or 45-degree line) diagram, show graphically the equilibrium in part a). c. What is the spending multiplier in this model? Tax multiplier? d. Show that leakages are equal to...