question archive Consider a simple goods market model: Consumption: C = a + bY Investment: I = γ0 − γ1i Government expenditure: G = G0 (a) Use a diagram of simple Keynesian model (Keynesian cross) to illustrate the equilibrium national output
Consider a simple goods market model: Consumption: C = a + bY Investment: I = γ0 − γ1i Government expenditure: G = G0 (a) Use a diagram of simple Keynesian model (Keynesian cross) to illustrate the equilibrium national output
Subject:EconomicsPrice: Bought3
Consider a simple goods market model: Consumption: C = a + bY Investment: I = γ0 − γ1i Government expenditure: G = G0 (a) Use a diagram of simple Keynesian model (Keynesian cross) to illustrate the equilibrium national output. You should clearly indicate the value for the intercept and the equilibrium output in the diagram. (b) Assuming interest rate remains constant, calculate the government multiplier. (c) Call the equilibrium output as Y1 after the government expenditure increases by $1 under the assumption in (b). If interest rate is flexible, after the $1 increase in government expenditure, output in the goods-money market equilibrium is Y2. Use a diagram (don't calculate the values) to indicate Y1 and Y2. (d) For (b) and (c), we assume general price level is fixed. If price is flexible, the actual output is Y3. Illustrate Y1, Y2, and Y3 in the aggregate supply-aggregate demand model and in the IS/LM model.
