Equilibrium exists at any output-income level in which the output level gives rise to an employment level which gives rise to an income level which gives rise to a total spending level which is just sufficient to clear total output off the market. Why is this a true statement?

Equilibrium exists at any output-income level in which the output level gives rise to an employment level which gives rise to an income level which gives rise to a total spending level which is just sufficient to clear total output off the market. Why is this a true statement?

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter8: The Keynesian Model

Section: Chapter Questions

Problem 19SQ

See similar textbooks

Similar questions

The table below shows the parameters for the economy of Hutu. C = 70 + 0.6Y XN = 150 - 0.1Y I = 140 G = 240 a. The value of equilibrium income is $ b. If exports were to increase by 90, the new value of equilibrium income would be $ C. Given your answer in part (b), the new value for XN is $ d. Given the equilibrium income in part (a), if full employment income is $925, what change in government spending is necessary to move the economy to this level? Government spending needs to (Click to select) v by $ Next > 18 of 33 < Prev
The following graph shows three total expenditure lines for an economy at three different price levels. AE130 corresponds to the price level of 130; AE110 corresponds to the price level of 110; AE150 corresponds to the price level of 150. The black line (which starts in the bottom left corner) is a 45-degree line illustrating the set of points for which real GDP and total expenditure are equal. 1. What is the level of equilibrium output at a price level of 110 is what? (First picture) 2. Plot aggregate demand curve in second picture
Due to an increase in consumer wealth, there is a $40 billion autonomous increase in consumer spending in the economies of Westlandia and Eastlandia. Assuming that the aggregate price level is constant, the interest rate is fixed in both countries, and there are no taxes and no foreign trade, complete the accompanying tables to show the various rounds of increased spending that will occur in both economies if the marginal propensity to consume is 0.5 in Westlandia and 0.75 in Eastlandia. What do your results indicate about the relationship between the size of the marginal propensity to consume and the multiplier?
Evaluate the following statement: Even if the prices of a large number of goods and services in the economy increase dramatically, the real GDP for the economy can still fall.
The table below shows the parameters for the economy of Hutu. Give your answers to one decimal point. XN = 160 0.15Y G = 220 C = 40 + 0.65Y I = 150 a. The value of equilibrium income is $ b. If exports were to increase by 40, the new value of equilibrium income would be $ c. Given your answer in part (b), the new value for XN is $ d. Given the equilibrium income in part (a), if full employment income is $800, what change in government spending is necessary to move the economy to this level? Government spending needs to decrease by $. A
Assume that the economy is now governed by a government and begins trading with other economies. The economy is described by the following set of equations. ?=1000+0.5⋅?d ID = 600 G=700 T=400 EX=0.1⋅Y IM=100+0.1⋅Y YD = Y - T Calculate the equilibrium level of output Y* a) 2857 b) 4000 c) 6274 d) 4400 Whats the government expenditure multiplier? Whats the tax multiplier? Whats the ba;anced budget multiplier?
Producers will change their prices when GDP is at the equilibrium level. True or False
The Italian economy can be characterized by Equation 9.1 Equation 9.1 C = 300 + 0.8Yd G = 400 T= 200 |= 200 49. The equilibrium level of output for the Italian economy is: A) $2,850. B) $3,145. C) $3,700. D) $3,800.
Suppose AE = 0.50 Y + 500. If GDP = $1,000, and There will be excess supply, so inventory will accumulate and firms will reduce output next period. There will be excess demand, so inventory will shrink and firms will increase output next period. There will be neither excess demand nor excess supply, so Y = $1,000 is the equilibrium level of GDP.
Consider an economy that uses exclusively labor and capital to produce.Suddenly, the government of the economy plans to permanently increase the level ofgovernment purchases. Please use words and figures to illustrate your answers.(1) Suppose the economy is a closed one. How does the long-run GDP of the economychange because of the increased government purchases? (2) Will your answer to (1) be changed if the economy is an open one? Explain youranswers briefly.(3) Suppose the economy is a closed one. Will the increased government purchaseschange the equilibrium interest rate?
Consider two closed economies that are identical except for their marginal propensity to consume (MPC). Each economy is currently in equilibrium with real GDP and total expenditure equal to $100 billion, as shown by the black points on the following two graphs. Neither economy has taxes that change with income. The grey lines show the 45-degree line on each graph. The first economy's MPC is 0.5. Therefore, its initial total expenditure line has a slope of 0.5 and passes through the point (100, 100). The second economy's MPC is 0.70. Therefore, its initial total expenditure line has a slope of 0.70 and passes through the point (100, 100). Now, suppose there is an increase of $30 billion in investment in each economy. Place a green line (triangle symbol) on each of the previous graphs to indicate the new total expenditure line for each economy. Then place a black point (plus symbol) on each graph showing the new level of equilibrium output. (Hint: You can see the slope and vertical…
Consider two closed economies that are identical except for their marginal propensity to consume (MPC). Each economy is currently in equilibrium with real GDP and total expenditure equal to $100 billion, as shown by the black points on the following two graphs. Neither economy has taxes that change with income. The grey lines show the 45-degree line on each graph. The first economy's MPC is 0.5. Therefore, its initial total expenditure line has a slope of 0.5 and passes through the point (100, 100). The second economy's MPC is 0.70. Therefore, its initial total expenditure line has a slope of 0.70 and passes through the point (100, 100). Now, suppose there is an increase of $30 billion in investment in each economy. Place a green line (triangle symbol) on each of the previous graphs to indicate the new total expenditure line for each economy. Then place a black point (plus symbol) on each graph showing the new level of equilibrium output.