line shows the relationship between planned aggregate expenditure and output, and line represents the condition that planned aggregate expenditure and output are equal. In the Keynesian cross diagram, the the expenditure; 45-degree O45-degree; consumption function 45 degree; expenditure consumption function; 45-degree

line shows the relationship between planned aggregate expenditure and output, and line represents the condition that planned aggregate expenditure and output are equal. In the Keynesian cross diagram, the the expenditure; 45-degree O45-degree; consumption function 45 degree; expenditure consumption function; 45-degree

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 2WNG

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The Life-Cycle/Permanent Income Model of Consumption makes a different prediction from the Keynesian Model, about how Consumption reacts to an increase in current income. Which of the following is the best description of the difference? O In the Keynesian Model, consumers will increasktheir spending by the mpc times the increase in income. In the Life-Cycle/Permanent Income Model, consumers will not increase their spending by much unless they believe that the increase in their income is permanent. O In the Life-Cycle/Permanent Income Model, consumers will increase their spending by the mpc times the increase in income. In the Keynesian Model, consumers will only increase their spending if they believe that the increase in their income is temporary. O In the Keynesian Model, consumers will increase their spending by the mpc times the increase in income. In the Life-Cycle/Permanent Income Model, consumers will only increase their spending if they believe that the increase in their income…
The figure below shows a simple macroeconomic consumption model. The letters N and D indicate curves, the letters T, A, L and Q denote (intersection) points. The "auxiliary triangles" marked in burgundy mean that if the value of the horizontal section shown in them is considered to be 1, the value of the vertical sections is s and r, respectively. It is known that L is 100 and ris 0.75. T 45° A 1 Give the equation of the savings function: S= (use a decimal point and 2 decimals if needed, and write capital letters as an unknown variable) How much is the value of A on the X axis?
Expenditure, E EA E E E₁ Y₁ Y₂ Y₁₂ Actual Expenditure Planned Expenditure Income, Output, Y 5. (Exhibit: Keynesian Cross) In this graph, the equilibrium levels of income and expenditure are: A) Y₁ and E₁ B) Y2 and E2 C) Y3 and E3 D) Y3 and E4 Please indicate clearly (through highlighting, underlying, etc.) and hand-write clearly or type-in an ar the following to receive full credit: A) Why is this response the right or wrong answer?
LIBR The Aggregate Expenditure or Keynesian macroeconomics model is based upon the theory that the level of GDP in the economy is determined by the level of aggregate spending. True False
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Ts assume that in the model of national economy household consumption is C = 300 + 0.9*DI, companies' gross vestment is Ig = 200, but government expenses are G = 250, while the sum of taxes collected by the government iS -150. Taking into account that disposable income DI =Y-T, calculate: a) Equilibrium level of income Y; b) Calculate the value of Marginal propensity to consume and value of Marginal propensity to save; c) Private consumption at macroeconomic equilibrium%3; d) Develop equation of saving and calculate amount of saving at the point of equilibrium level of income.
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
The Keynesian cross 45 degree line represents: Every point where aggregate expenditure is equal to real GDP O The points where aggregate expenditure is greater than real GDP The points where Keynes believed that aggregate expenditure should be O The points where aggregate expenditure is less than real GDP
25. Which one of the following statements is INCORRECT? A The level of autonomous consumption is determined by the non-income determinants of consumption spending. The impact of a change in one or more of the non-income determinants of consumption can be illustrated by a shift В of the consumption function. The level of autonomous consumption determines the position of the consumption function. Investment spending is the most stable component of aggregate spending in the C economy.
option C is incorrect Use the Keynesian cross model to predict the impact of an increase in government purchases on equilibrium GDP. State the direction of the change and give a formula for the size of the impact. O An increase in taxes shifts the planned expenditure function downward. The change in income is given by AY= AY=. O An increase in taxes shifts the planned expenditure function upward. The change in income is given by -MPC 1-MPC ΔΥ= -MPC 1-MPC AY= O An increase in taxes shifts the planned expenditure function inward. The change in income is given by XAT 1 1-MPC XAT 1 1-MPC O The direction of the shift is undetermined without knowing the slope of the PE function. The change in income is given by XAT XAT
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Q3. Use the Keynesian cross model 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.a. An increase in government purchasesb. An increase in taxesc. Equal-sized increases in both government purchases and taxes