onsider 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 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 solve for Y.) What are equilibrium consumption, private saving, public saving, and national

onsider 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 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 solve for Y.) What are equilibrium consumption, private saving, public saving, and national

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 7QP

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Assume a closed economy: Y=C+I+G In the Keynesian Cross model, as in the slides, assuming the marginal propensity to consume, c1, is less than one, which FOUR of the following statements are correct? Select one or more: A. The government sends cheques to all taxpayers, worth a total of £1 billion. As long as at least some of this results in higher autonomous consumption, GDP will rise by more than £1 billion. B. A rise in government spending on benefits or other transfers will increase Y by more than the increase in benefits C. If the c1 = 0.75 the multiplier will be 4 D. A fall in autonomous consumption will reduce Y by more than the initial fall E. The government sends cheques to all taxpayers, worth a total of £1billion. As a result, autonomous consumption increases by £0.5 billion. As long as c1 > 0.5, GDP will rise by more than £1 billion F. If consumers seek to save more by reducing their autonomous consumption, c0, this will reduce output.
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