At equilibrium in the simple Keynesian model of income determination, which of the following statements is true? O Aggregate expenditure is equal to income and actual GDP is equal to potential GDP O Investment is equal to saving, and income is equal to aggregate expenditure O The market clears and quantity demanded equals quantity supplied O Investment is equal to saving, and actual GDP is equal to potential GDP

At equilibrium in the simple Keynesian model of income determination, which of the following statements is true? O Aggregate expenditure is equal to income and actual GDP is equal to potential GDP O Investment is equal to saving, and income is equal to aggregate expenditure O The market clears and quantity demanded equals quantity supplied O Investment is equal to saving, and actual GDP is equal to potential GDP

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter9: Aggregate Expenditures

Section: Chapter Questions

Problem 5E

See similar textbooks

Similar questions

Assume that the economy, as represented by the simple Keynesian model, is in equilibrium with income equal to $6 million and consumption spending equal to $5 million. Which of these is correct? O Investment is $1 million. There is no saving in this economy. The economy will go into disequilibrium because consumption is not equal to income. The information provided is insufficient to determine the level of investment spending.
Q.1.14 In the Keynesian model, what is the most important determinant of ahousehold’s consumption?(a) Disposable income.(b) Total wealth.(c) The number of persons in the household.(d) Its’ net wealth. Q.1.15 Induced consumption is: (a) the part of consumption which is independent of the level of income.(b) the minimum level of consumption that is financed from sources otherthan income.(c) The maximum level of consumption that is financed from sources otherthan income.(d) shown by the slope of the consumption function.Q.1.16 In the Keynesian model, an introduction of a proportional tax will: (a) increase the slope of the consumption function.(b) reduce the multiplier.(c) increase the equilibrium level of income.(d) increase the multiplier.Q.1.17 A decrease in the price level will: (a) shift the AS curve to the left.(b) shift the AD curve to the left.(c) shift the AS curve to the right.(d) leave both the AD curve and the AS curve unchanged.
The Simple Keynesian Model (i.e., the income-expenditure model). Assume: C = 150 + 0.9 DI I = 50 DI = C + I in equilibrium for a 2-sector model (Note: DI = C in a 1-sector model) Define the term, consumption. What is the value of “autonomous” consumption (also called “a” or the vertical intercept)? What is the value of the slope (also referred to as “b”) of the consumption function? There’s another name for the slope of the consumption function. What is it? What is the value of DI when the model is in equilibrium? What is the value of the “oversimplified” expenditure multiplier? If full-employment means that DI = $5000, then how much should autonomous consumption (or autonomous investment) increase to achieve full-employment? (Hint: Use the multiplier process formula.) Draw a graph of this 2-sector model. Indicate equilibrium DI, full-employment DI, as well as…
In the Keynesian cross model, assume that the consumption function is given by C = 20 + 0.8(Y- T). Planned investment is 200; government purchases and taxes are both 400. There is no foreign trade. An economist has claimed that the full employment level of output is 2,400. How much should the government expenditure or taxes rise or fall to achieve full employment?
Q.1.14 In the Keynesian model, what is the most important determinant of a household’s consumption?(a) Disposable income.(b) Total wealth.(c) The number of persons in the household.(d) Its’ net wealth.
(a)‌Elaborate‌ ‌‌THREE‌ ‌(3)‌ ‌determinants‌ ‌in‌ ‌which‌ ‌consumption‌ ‌can‌ ‌be‌ ‌increased‌ ‌according‌ ‌to‌ ‌the‌ ‌consumption‌ ‌function.‌ ‌ ‌ (b)‌Assume‌ ‌that‌ ‌a‌ ‌three-sector‌ ‌economy‌ ‌in‌ ‌Country‌ ‌W.‌ ‌The‌ ‌amount‌ ‌of‌ ‌ autonomous‌ ‌consumption‌ ‌is‌ ‌RM300‌ ‌million‌ ‌with‌ ‌the‌ ‌proportion‌ ‌of‌ ‌an‌ ‌increase‌ ‌in‌ ‌income‌ ‌that‌ ‌is‌ ‌spent‌ ‌on‌ ‌consumption‌ ‌is‌ ‌0.5.‌ ‌An‌ ‌induced‌ ‌tax‌ ‌of‌ ‌20%‌ ‌is‌ ‌imposed‌ ‌by‌ ‌the‌ ‌country.‌ ‌The‌ ‌amount‌ ‌of‌ ‌investment‌ ‌is‌ ‌RM250‌ ‌million,‌ ‌and‌ ‌the‌ ‌amount‌ ‌of‌ ‌government‌ ‌spending‌ ‌is‌ ‌RM150‌ ‌million.‌ ‌ ‌ ‌ (i)‌Calculate‌ ‌the‌ ‌national‌ ‌income‌ ‌equilibrium.‌ ‌ ‌ ‌ (ii)‌Based‌ ‌on‌ ‌your‌ ‌answer‌ ‌in‌ ‌(i),‌ ‌show‌ ‌the‌ ‌aggregate‌ ‌expenditure‌ ‌graph.‌ ‌ ‌ ‌ (iii)‌Explain‌ ‌what‌ ‌would‌ ‌happen‌ ‌to‌ ‌the‌ ‌national‌ ‌income‌ ‌equilibrium‌ ‌if‌ ‌the‌ ‌ investment‌ ‌changes‌ ‌by‌ ‌RM100‌ ‌million.‌
n the Keynesian cross model, assume that the consumption function is given by C = 110 + 0.75(Y - T). Planned investment is 300; government purchases is 350. Assume a balanced budget. a. Graph planned expenditure as a function of income.b. What is the equilibrium level of income?c. If government purchases increase to 400, what is the new equilibrium income? What is the multiplier for government purchases? Solve D and Ed. What level of government purchases is needed to achieve an income of 2,200? (Taxes remain unchanged.)e. What level of taxes is needed to achieve an income of 2,200? (Government purchases remain at 350.)
(Building IS–LM Model) 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?
In the Keynesian cross, assume that the consumption function is given byC = 200 + 0.75 (Y - T).Planned investment is 100; government purchasesand taxes are both 100.d. What level of government purchases is neededto achieve an income of 1,600?
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. (solve three tasks) Graph planned expenditure as a function of income. What is the equilibrium level of income? If government purchases increase to 125, what is the new equilibrium income?
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. What happens to unplanned inventory investment? Should equilibrium Y be higher or lower than 1,500?
In the Keynesian cross model, assume that the consumption function is given byC = 110 + 0.75(Y - T). Planned investment is 300; government purchases is 350. Assume a balanced budget.a. Graph planned expenditure as a function of income.b. What is the equilibrium level of income?c. If government purchases increase to 400, what is the new equilibrium income? What is the multiplier for government purchases?d. What level of government purchases is needed to achieve an income of 2,200? (Taxes remain unchanged.)e. What level of taxes is needed to achieve an income of 2,200? (Government purchases remain at 350.)