Explain the effect of an increase in exports on the equilibrium GDP in the Keynesian income-expenditure model. In your answer, carefully show the new equilibrium and explain the adjustment to the new equilibrium.
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- Use the Keynesian cross to predict the impact on equilibrium GDP of the following. In each case, state the direction of the change and give a formula for the size of the impact. (solve all the three cases) An increase in government purchases An increase in taxes Equal-sized increases in both government purchases and taxesThe Aggregate Expenditure Model is traditionally called the” Keynesian Cross”. Use the Aggregate Expenditure Keynesian Cross diagram to show what happens to the economy under the following conditions: (Note that is different from the AS-AD Model.) What happens in the model if government expenditures are increased (G↑)? What happens if taxes are raised (T↑)? What happens to the US economy if the rest of the world experiences economic growth and imports more US goods (X↑)?Use the Keynesian cross to predict the impacton equilibrium GDP of the following. In eachcase, state the direction of the change and give aformula for the size of the impact.a. An increase in government purchasesb. An increase in taxesc. Equal-sized increases in both governmentpurchases and taxes
- Which equation represents the macroeconomic equilibrium condition in the aggregate expenditure (AE) model?)Assume that an economy is characterized by the following equations:C = 250 + 0.75(Y - T);T = 100;G = 50I = 200 - 25rMs = 1000;P = 2;Md /P = Y - 100ra. Using the Keynesian cross model, find the equilibrium level of Y when r = 6 and graph the results.b. Calculate the IS and LM equations. Use the IS-LM model to find the equilibrium level of r and Y.Graph the results.A larger marginal propensity to import will make the slope of the aggregate expenditure function flatter. True or Flase
- the question is true or false: "An increase in business investment spending has the same effect on the level of ad as an increase in the same amount of government spending" can you explain what the answer is? Would they equal each other out?Nigeria is currently experiencing a recessionary gap of approximately 24.6 billion in their currency. Its MPC is approximately 0.8. How much would the government have to change taxes to close the gap? Assume a horizontal SRAS. If the government should decrease taxes, enter a negative answer. one decimal placeSuppose the marginal propensity to consume is 0.6. Use the Keynesian Cross model to predict the impact on equilibrium income of each of the following policies. State the direction of the change and give a formula for the size of the impact. a. an increase in government purchases of $100billion b. an increase in taxes of $100 billion c. a $100 billion increase in both government purchases and taxes?
- Consider the following initial conditions (where all dollar amounts are in billions): C = 600 + 0.6y D , I = 400, G 1 = 300, T 1 = 200 A. Given these initial conditions, calculate y*. Draw a rectangle around the expenditure equation resulting from step I and your calculated y* in step II. Draw a graph showing the total expenditure (E) curve and y*. Label y*, E*, and the E-intercept of the expenditure equation. If yF were $3,100, would the economy be in a recessionary gap or an inflationary gap? What is the size of the gap? Label yF and show the gap on the graph from B. If the government were to try to close the gap by changing the level of government spending, how much of a change (∆G) would be necessary to close the gap? What would be the new level of government spending (G2 )? What is the new expenditure equation (draw a rectangle around it)? On the graph from part B, draw the new expenditure curve, E2 , and label the new y* and the new E intercept. Alternatively, if the…According to the Keynesian cross model if the marginal propensity to consume is 2/3, cut in taxes of 120 Billion increases equilibrium income by a) 160 Billion b) 180 Billion C) 240 Billion d) 360 BillionIn 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?