Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. economics
  3. 2. consider a keynesian model of the economy with

2. Consider a Keynesian model of the economy with the following equations: C = 300 + 0.7Yd Transfer...

80.2K

Verified Solution

Question

Economics

2. Consider a Keynesian model of the economy with the followingequations:

C = 300 + 0.7Yd

Transfer payments = 500

T = 0.1Y

I = 300

G = 400

X = 150

M = 0.2Y

(a) Calculate the equilibrium income level.

(b) Government spending on goods and services increases by 50.Calculate the new equilibrium level of income. (1 mark)

(c) If potential GDP is 2,750 what is the size of the output gapbetween potential and actual GDP (derived from (a) above)? How muchshould public spending have been increased by in order to havefully closed the output gap?

(d) In the short-run Keynesian model of income determinationwhat is the cause of the output gap, and what are the possiblemacro solutions?

Answer & Explanation Solved by verified expert
4.2 Ratings (814 Votes)
possible reason for negative output gap    See Answer
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students

Q

Practice question 3. If the actual support for presidential candidate A was 50%, what is the probability...

Statistics
Q

Match Type with 3 Columns 4 Rov For conducting rods each of length R are...

Physics
Q

A block of mass 6 kg kept on a horizontal smooth surface is act B...

Physics
Q

Mr. Montoya instructs the students in his math class to draw a rectangle with a...

Basic Math
Q

If an object is projected from a height of 112 ft with an initial velocity...

Basic Math
Q

Electronic Boutique NO INTEREST \& NOPAYMENTS FOR...

Accounting
Q

PLEASE Explain the 2 circled in RED, Thanks B.C. Brown and Company, a manufacturer...

Accounting
Q

Your boss has just contacted you about an inventory decision. It seems she is going...

Accounting
Q

5. Due to the sluggish economy, the Bi-Wheels Company has experienced some difficulty in selling...

Accounting
Q

Current Attempt in Progress The components in the income statements of companies A, B, C,...

Accounting
Q

Sharp Motor Company has two operating divisionsan Auto Division and a Truck Division. The company...

Accounting
Q

Quantitative Problem 1: You deposit $2,400 into an account that pays 3% per year. Your...

Finance