Question

how is the equilibrium national income (output) determined? explain using the Keynesian cross.

how is the equilibrium national income (output) determined? explain using the Keynesian cross.

Business   Economics   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

the graph shown below shows the Keynesian Cross model. There is a 45* line or the ideal consumption or income line. This line shows the points where all the income earned in the economy are consumed.

After that, we have AE line or aggregate expenditure line. This line includes Consumption, investment, government expenditure and net exports. The economy is in equilibrium at the point where the Ae curve meets the YE curve or where the aggregate demand curve meets the total expenditure curve. IN the below graph, the AE curve meets the YE curve at point "a" and then after an increase in the consumption the AE curve increased to a higher level increasing the equilibrium at point "b". The output at this points will be Y and Y' (after an increase in consumption.)

  

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Using the Keynesian Cross (KX) framework, illustrate the effect on equilibrium output (GDP) if there is...
Using the Keynesian Cross (KX) framework, illustrate the effect on equilibrium output (GDP) if there is a negative investment shock (those pesky and volatile Keynesian “”animal spirits”). Explain the flow of logic by which the adjustment process (inventory change) ultimately causes output to adjust so that equilibrium occurs between planned expenditure and actual expenditure.
Answer the following question: (a) Using the Keynesian Cross, explain how a tax cut, ∆T, affects...
Answer the following question: (a) Using the Keynesian Cross, explain how a tax cut, ∆T, affects nation income. Using the appropriate multiplier, what is the magnitude of the change in national income, ∆Y . What is the change in consumption and the change in investment? Explain. (Hint: for investment, what are we treating as exogenous in this model?) (b) Use the IS-LM model to analyze the effect of the policy in part (a). How does the change in national income...
In Keynesian Cross analysis, if actual expenditure exceeds planned expenditure, explain the process by which output...
In Keynesian Cross analysis, if actual expenditure exceeds planned expenditure, explain the process by which output (real GDP) returns to its equilibrium level.
11 explain the determinants of planned consumption what will cause a shift in the consumption function...
11 explain the determinants of planned consumption what will cause a shift in the consumption function 12 how is the equilibrium national income {output} determined? explain using the Keynesian cross 13 derve the aggregate demand from the equilibrium level of income or output 22 briefly discuss the domestic agricultural policies which provide food security and stabilize the agricultural market
: The planned expenditure crosses the 45° degree line is the equilibrium condition of the Keynesian...
: The planned expenditure crosses the 45° degree line is the equilibrium condition of the Keynesian cross model. Within the situation briefly explain and show graphically two cases of the Keynesian cross model: The output is higher than the equilibrium level 2 The output is lower than the equilibrium level
Consider the following Keynesian-cross model of an economy: Consider the following Keynesian-cross model of an economy:...
Consider the following Keynesian-cross model of an economy: Consider the following Keynesian-cross model of an economy: C = 170 + 0.6 ( Y − T ) I = 250 G = 300 T = 200 By how much would government purchases have to increase in order to increase the equilibrium level of income by 50? By how much would government purchases have to increase in order to increase the equilibrium level of income by 50?
The IS curve. (a) Explain how to derive the IS curve from the Keynesian Cross. Your...
The IS curve. (a) Explain how to derive the IS curve from the Keynesian Cross. Your answer should include carefully labeled diagrams depicted the Keynesian Cross and the IS curve. (b) How does an increase in the marginal propensity to consume affect the slope of the IS curve. Explain.
14. According to the Keynesian Cross model of income, how would each of the following shocks...
14. According to the Keynesian Cross model of income, how would each of the following shocks affect a nation’s real aggregate income (Y) in the short run, all else equal? For each shock, be sure to clearly state a predicted direction of change for income, illustrate your prediction with a Keynesian Cross Diagram, and explain your predictions intuitively in words.a.Government purchases decline b. Congress cuts household income taxes c. Autonomous consumption increases d.Total factor productivity increases
Taxes are reduced. Use Keynesian cross model to show graphically the impact of lower taxes on...
Taxes are reduced. Use Keynesian cross model to show graphically the impact of lower taxes on the equilibrium level of income. Label axes, curves, equilibrium, curve shifts. Explain what happens to income equilibrium due to tax reduction.
What determines output in the short Run? Explain using the Classical model, Keynesian model or Phillips...
What determines output in the short Run? Explain using the Classical model, Keynesian model or Phillips curve.
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT