1. In the Keynesian model, suppose that the economy has the following values : C = 100 + 0.75*(Y-T) G = 300 I = 200 NX = 0 T = 200

a) Solve for the level of equilibrium output in this economy.

b) What is the multiplier on government spending? (I want a specific number here, not a definition)

c) Household savings is defined as disposable income minus consumption (Y - T = C). What is the level of household savings in this economy?

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Kritika KrishnakumarLv10

28 Sep 2019

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Related questions

1.In the Keynesian model, suppose that the economy has the following values :

C = 100 + 0.75*(Y-T) G = 300 I = 200 NX = 0 T = 200

1a. Suppose that households become nervous about the future of the economy and decide that they will consume less and save more money, so their new consumption function becomes C = 0.75*(Y-T). Solve for the new equilibrium level of output and calculate how much households end up saving.

1b. Ignoring the change in consumption from part d, how much would output increase if government spending increased by 100?

1c. Ignoring the change in consumption from part d, how much would output increase if taxes were cut by 100?

harlequinmallard904

1. Assume an economy with a Household Sector and a Business Sector. Household spending is given by C= 400 + 0.9Qd. Since there is no public sector, Qd = Q. Business sector spending is given as I = 1300. Determine the level of Autonomous Spending, the Spending Multiplier, GDP (Q), Consumption Spending (C) and Household Savings.

2. Now add a Foreign Sector where Exports are X = 1000 and Imports are Im = 500 + 0.1Q. Determine the level of Autonomous Spending, the Spending Multiplier, GDP (Q), Imports, Net Exports, Consumption Spending (C) and Household Savings.

3. Now add a public sector where Government Purchases are G = 2000, Transfer Payments are Tr = 2500 and Taxes are Tx = 500 + (1/3)Q. With the public sector Disposable Income is Qd = Q - Tx + Tr. Determine the level of Autonomous Spending, the Spending Multiplier, GDP (Q), Imports, Net Exports, Taxes, Disposable Income, Consumption Spending (C), Household Savings and the Deficit.

Please explain what each equation represents in the answer.