Suppose a closed economy with no government spending or taxing is capable of producing an output of $1900 at fullemployment. Suppose also that autonomous consumption is $100, intended investment is $90, and the mpc is 0.50.How much additional autonomous spending (for instance, from the government) is needed to move the economy to fullemployment? According to the lectures, which of the following ideas are representative of (neo)classical (orthodox) theory, which are representativeof (post)Keynesian (heterodox) theory, and which are shared by both theories?In equilibrium, aggregate demand (total planned spending)-- must equal output and incomeDemand, particularly intended investment, drives supplySupply creates its own demandCapitalist economies tend to full employment, at least in-- the long runInterest rates fall when money saved exceeds the demandfor those funds for investment, until savings equalsinvestmentSaving is a leakage out of, and investment is an injection- into, the spending flow1. (neo)classicalInvestment and savings are primarily functions of the rate-- of interest2. (post)Keynesian3. BothThe paradox of thrift"In the long run, we're all dead"Capitalist economies will normally fail to reach full- employment due to insufficient aggregate demandSavings equals investment in equilibrium (ignoringgovernment or foreign sector)The loanable funds marketOutput, income, and employment fall when money savedexceeds intended investment, until savings equalsinvestment

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Suppose a closed economy with no government spending or taxing is capable of producing an output of $1900 at full employment. Suppose also that autonomous consumption is $100, intended investment is $90, and the mpc is 0.50. How much additional autonomous spending (for instance, from the government) is needed to move the economy to full employment?

Suppose a closed economy with no government spending or taxing is capable of producing an output of $1900 at full employment. Suppose also that autonomous consumption is $100, intended investment is $90, and the mpc is 0.50. How much additional autonomous spending (for instance, from the government) is needed to move the economy to full employment?

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter8: The Keynesian Model

Section: Chapter Questions

Problem 5SQ

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