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 The points where aggregate expenditure is less than real GDP

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 The points where aggregate expenditure is less than real GDP

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter23: The Aggregate Expenditure Model

Section: Chapter Questions

Problem 12P

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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
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
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?
The chart below gives the data necessary to make a Keynesian cross diagram. Assume that the tax rate is 0.4 of national income, the MPC out of after-tax income is 0.9, investment is 58, government spending is 60, exports are 40, and imports are 0.1 of after-tax income. National Income Minus After-tax ConsumptionI+G+X income Aggregate Expenditures Imports 100 104 200 300 400 500 600 What does consumption equal when income equals 600?
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…
Q.1.14 In the Keynesian model, what is the most important determinant of ahousehold’s consumption?(a) Disposable income.(b) Total wealth.(c) The number of persons in the household.(d) Its’ net wealth. Q.1.15 Induced consumption is: (a) the part of consumption which is independent of the level of income.(b) the minimum level of consumption that is financed from sources otherthan income.(c) The maximum level of consumption that is financed from sources otherthan income.(d) shown by the slope of the consumption function.Q.1.16 In the Keynesian model, an introduction of a proportional tax will: (a) increase the slope of the consumption function.(b) reduce the multiplier.(c) increase the equilibrium level of income.(d) increase the multiplier.Q.1.17 A decrease in the price level will: (a) shift the AS curve to the left.(b) shift the AD curve to the left.(c) shift the AS curve to the right.(d) leave both the AD curve and the AS curve unchanged.
In Keynesian 45 degree diagram, at the intersecting point between the line representing and the line representing and total spending of are exactly equal to national income or real GDP. This means that the amount that is bought is exactly equal to the amount that is actually produced. This is the level of output in this model, shown as Ye. What happens when real GDP produced is less than Ye? If the amount consumers, firms, government and foreign countries want to buy is than the quantity of real GDP, then there is insufficient output to satisfy total expenditure. On the other hand, if real GDP is greater than Ye, the amount that consumers and firms want is bought is than real GDP produced. Too many goods and services are being produced relative to total expenditure. With too much spending relative to output produced, firms' inventories are sold, thus providing firms with the signal to production, causing real GDP to to Ye. With too little spending relative to what is produced, firms…
Price level (GDP deflator, 2000 = 100) 130 120 110 100 90 0 1) 0.2. 2) 0.4. 3) 0.1. 9.6 4) 0.8. B AD2 A In the above figure, if the slope of the aggregate expenditure function is 0.75, to shift the aggregate demand from AD1 to AD2 the government needs to decrease its autonomous expenditure by AD₁ ADO 9.8 10.0 10.2 10.4 10.6 Real GDP (trillions of 2000 dollars)
Name four differences between the Keynes and Fishers model of consumption
2b. Use the Keynesian cross to predict the impact on equilibrium GDP of equal-sized increases in both government purchases and taxes.
Answer the following questions, which relate to the aggregate expenditures model: Instructions: Enter your answer as a whole number. a. If Ca is $100, lg is $50, X, is -$10, and Gis $30, what is the economy's equilibrium GDP? 2$ b. If real GDP in an economy is currently $20o, Ca is $100, lg is $50, X, is -$10, and Gis $30, will the economy's real GDP rise, fall, or stay the same? |(Click to select) c. Suppose that full-employment (and full-capacity) output in an economy is $200. If Cą is $150, Ig is $50, Xn is -$10, and Gis $30, what will be the macroeconomic result? O There will be an inflationary expenditure gap and employment levels will be above the full-employment level. O There will be an inflationary expenditure gap and employment levels will be below the full-employment level.
The chart below gives the data necessary to make a Keynesian cross diagram. Assume that the tax rate is 0.4 of national income, the MPC out of after-tax income is 0.9, investment is 58, government spending is 60, exports are 40, and imports are 0.1 of after-tax income. Alt Text: This chart contains the following columns: National Income, After-tax income, Consumption, I+G+X, Minus Imports, and Aggregate Expenditures. The National Income Column contains the following values for each of the following rows: 100, 200, 300, 400, 500, and 600. The only other value provided is the consumption, 104, for national income, 100. What does consumption equal when income equals 600? Group of answer choices a. 324 b. 374 c. 540 d. 104