In the Keynesian model, the consumptionfunction is C = 0.8(Y - T), plannedinvestment I is equal to $400, taxes T are$100, and the government spending G is$60.Suppose the current level of output is.Y = $1,850. Are firms in this economyexperiencing an unexpected change ininventory? If yes, by how much?%3D

In a closed economy, the planned aggregate expenditure is the sum of consumption, investment, and…

Answered: In the Keynesian model, the consumption…

In the Keynesian model, the consumption function is C = 0.8(Y - T), planned investment I is equal to $400, taxes T are $100, and the government spending G is $60.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter10: Keynesian Macroeconomics And Economic Instability: A Critique Of The Self Regulating Economy

Section: Chapter Questions

Problem 6QP

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Question

In the Keynesian model, the consumption
function is C = 0.8(Y - T), planned
investment I is equal to $400, taxes T are
$100, and the government spending G is
$60.
Suppose the current level of output is.
Y = $1,850. Are firms in this economy
experiencing an unexpected change in
inventory? If yes, by how much?
%3D

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In the Keynesian macroeconomic model, the equation for the savings function is given as: S = -420 + 1/4Y. Based on this information, which of the following statements is correct? (1) The marginal propensity to consume is 1/4;(2) The marginal propensity to save is -420; (3) At an income level of R1 000, the value of savings is 250;(4) At an income level of R1 000, the level of savings is -170.
Which of the following features of a Keynesian consumption function is not true? a. In the short run, current disposable income has the most impact on consumption. b. As income rises, so does the average tendency to consume. c. the average tendency to consume decreases as income increases decrease d .The marginal consumption propensity is smaller than one.
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?
Consider a keynesian macromodel Y=(C0+G+I) / (1-c) where C0 is autonomus consumption, G is government consumption expenditure, I is investment expenditure, c is the marginal propensity to consume. Assume constant marginal productivity of labor. What will be the result of an increasing government consumption expenditure in this module, if not other paramiters are changed? a. Lower investment. b. Higher employment. c. Higher inflation. d. Lower employement.
In the Keynesian cross model, assume that the consumption function is given by C = 100 + 0.75(Y - T). If government spending increases by AG = 100, what is the increase in output? How does your answer change when the spending increase is financed by an equal increase in taxes?
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. What level of government purchases is needed to achieve an income of 1,600?