PlannedActual expenditureexpenditure, PEPEPlanned expenditurePEPEPEY,Y2Y3Income, output YIn the Keynesian Cross shown above we know:Y2 = 650, Y3 = 800, and PE3 = 740.a) What is the value of the tax multiplier?b) If I increases by 60, by what amount will Cincrease in equilibrium?c) If both G and T increases by 60, how muchwill equilibrium Y* increase?

Given information: Y2 = 650, Y3 = 800 and PE3 = 740 At Y3=800, PE3 = 740 At Y2, the actual…

Answered: Planned Actual expenditure expenditure,…

Planned Actual expenditure expenditure, PE PE Planned expenditure PE, PE2 PE Y Y2 Y3 Income, output Y In the Keynesian Cross shown above we know: Y2 = 650, Y3 = 800, and PE3 = 740.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter9: The Keynesian Model In Action

Section: Chapter Questions

Problem 3SQP

See similar textbooks

Related questions

Q: An economy is currently in equilibrium. The following figures refer to elements in its national…

A: The market value of all commodities and services produced in the economy over a certain time period…

Q: The chart below gives the data necessary to make a Keynesian cross diagram. Assume that the tax rate…

A: Likewise to GDP, aggregate expenditure assesses the complete expenditure of a country at a given…

Q: The figure below shows a simple macroeconomic consumption model. The letters N and D indicate…

A: The term "savings function" refers to the standard equation of savings that defines the relationship…

Q: What is the Euler equation for consumption, and what is its economicinterpretation?

A: Consumption: The use of goods and services is called consumption. The consumption of goods and…

Q: Assume: Y= C + I + G + NX C = 400 + (0.8)YD Io = 200 G = 300 +…

A: The expenditure multiplier is the measure of change in the aggregate production caused by the change…

Q: Use the Keynesian cross to predict the impact on equilibrium GDP of the following. In each case,…

A: The Keynesian Cross is a graphical representation of the planned expenditure function and actual…

Q: Disposable Consumption income expenditure (€, thousands) (€, thousands) 200 220 300 300 400 380 500…

A: Disposable income refers to the income of households that is used to consume goods and services, and…

Q: Aggregate Expenditure(in millions of dollars) What happens in the simple Keynesian model below if…

A: The Paradox of Thrift refers to the theory that raised savings in the short term can decrease…

Q: In the above figure, if the slope of the aggregate expenditure function is 0.75, to shift the…

A: Aggregate demand has four components, i.e., consumption spending, investment spending, government…

Q: Adjust the following graph by shifting either the curve or the point on the curve to illustrate a…

A: The Aggregate Demand is key determinant of Income level in the economy. Change in AD causes change…

Q: In consumption theory, what is meant by the expression “consumption smoothing”? Why is consumption…

A: Consumption theory examines how individuals and households make decisions about their spending and…

Q: Consider a closed economy where the goods and money markets are described by the following…

A: Provided information: The consumption function of the economy- C = 500 + 0.8 (Y - T) Invest…

Q: What happens in the simple Keynesian model if households expect lower income in the future and…

A: The aggregate expenditure refers to the total expenditure on all the goods and services produced in…

Q: Analyse with a graph the effects of an increase in government spending on the IS-LM curve

A: As aggregate demand increases due to increased government spending, more output is demanded at each…

Q: The Aggregate Expenditure Model is traditionally called the” Keynesian Cross”. Use the Aggregate…

A: The economics as a study is based upon the basic idea of scarcity, where the resources with the…

Q: Figure 8.4 TE 45 TES C+I+G3+(Xx-IM). TE2 =Cz+I+G+(x-IM): TE: =C+I+G+(X-IM): Y3 y Which of the…

A: Total expenditure is the sum of consumption Expenditure , investment expenditure , government…

Q: Using the income-expenditure model, what is the expected effect (increase, decrease, or no effect)…

A: Income-expenditure method: It refers to the model under which the fluctuations and spending are…

Q: Explain how the equilibrium Output is determined utilizing the Income Approach, Commonly called: The…

A: *The aggregate demand refers to the total expenditure. *The aggregate supply refers to the Income.

Q: The chart below gives the data necessary to make a Keynesian cross diagram. Assume that the tax rate…

A: Gross domestic product is the summation of consumption, investment, government expenditure, and net…

Q: We have the following information for a country. Consumption Function: C = 200+ 0.8(Y-T) Net Taxes:…

A: Consumption function : C= 200+0.8(Y-T)Net taxes: T=125Planned investments: I = 100Government…

Q: Which equation represents the macroeconomic equilibrium condition in the aggregate expenditure (AE)…

A: Investment comprises of the following three components: a) Demand for new capital goods by business…

Q: Assume you have the following model of the expenditure sector: AD = C + I + G + NX C = Co +…

A: Expenditure multiplier, which is also known as spending multiplier, refers to the ratio of change in…

Q: 15. Explain why for countries with a large spending rate (such as the United States), errors in…

A: Answer-

Q: Explain how the equilibrium Output is determined utilizing the Income Approach, Commonly called: The…

A: The Income-Expenditure approach, originally postulated by economist John Maynard Keynes, examines…

Q: Country X's long run full employment level of Real GDP is estimated to be $22,900,000. However, the…

A: In macroeconomics, understanding the concept of potential output and its relationship with actual…

Q: Assume the following model of the expenditure sector: S=C+I+G+Nx TR=100 C=420+(4/5)YD I=160 G=180…

A: In the expenditure model, Y = C + I + G + NX , since the values are given: Y= 420 + (4/5)[Y –(1/6)Y…

Q: The Keynesian cross 45 degree line represents: Every point where aggregate expenditure is equal to…

A: The Keynesian model is a framework that emphasizes the role of aggregate demand in influencing…

Q: The chart below gives the data necessary to make a Keynesian cross diagram. Assume that the tax rate…

A: National Income Ater tax Income Consumption I+G+X Minus Imports Aggregate Expenditure 100…

Q: We again assume a simple closed economy with GDP of 100 and: c0 (autonomous consumption) = 20 c1…

A: we are given with a simple closed economy where,GDP= 100c0 or (autonomous consumption) = 20c1 or…

Q: 3. Assume equations 1 and 2 below were estimated from the data gathered that will represent the…

A: Note:- Since we can only answer up to three subparts, we'll answer first three. Please repost the…

Q: An economy is described by the following equations: C= 1500 + 0.75(Y - T) po = 800 G= 1500 X = 100…

Q: State the main properties of keynesian consumption function i need three properties.

A: According to the given question In simple words we can say that Keynesian consumption function is an…

Q: Assume the following model of the expenditure sector: S=C+I+G+Nx TR=100 C=420+(4/5)YD I=160 G=180…

A: We know the multiplier is 3 times. c= 4/5 (constant from disposable income) In this model there…

Q: Depict graphically the equilibrium level of National Product (NP) using the Aggregate Expenditure…

A: Aggregate demand refers to the total amount of goods and services that households, businesses, the…

Concept explainers

Risk and Uncertainty

Uncertainty refers to a situation when there is one possible outcome of a decision but where the probability of occurrence of each particular outcome is not known or cannot be estimated.

Question

Planned
Actual expenditure
expenditure, PE
PE
Planned expenditure
PE
PE
PE
Y,
Y2
Y3
Income, output Y
In the Keynesian Cross shown above we know:
Y2 = 650, Y3 = 800, and PE3 = 740.
a) What is the value of the tax multiplier?
b) If I increases by 60, by what amount will C
increase in equilibrium?
c) If both G and T increases by 60, how much
will equilibrium Y* increase?

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Typed Plzzzz And Asap
An economy is characterised by the following equations: C = c0 + c1YD YD = Y-TI = bo+b1Y Government spending (G) and taxes (T) are constant, while investment (I) is proportional to output (Y). Solve for the equilibrium output Derive the Keynesian multiplier for G, and discuss how is the value of the multiplier affected by the relationship between investment and output? S E
In a keynesian model it is assumed that the consumption function is given by C= 2000 + 0.75 (Y-T) and the planned investment is 1,000 government purchases and taxes are both of those and formulate and draw a graph of planned expenditure as a function of income What is the equilibrium level in the part above If the government purchases increased by 1250 what is the equilibrium income With the aid of a algebra prove that a balanced budget multiplier is always equals to 1
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?
Derive the expenditure multiplier using the lump sum taxes (or fixed sum)
calculate the expenditure multiplier, if the marginal propensity to consume = .80, the tax rate = .25 and the marginal propensity to import = .1
For the multiplier to be positive what condition must be satisfied?
i need the answer quickly
14. The economy is experiencing a $225 million inflationary gap. If the government 02 decided to solve this macroeconomic disequilibrium using a change in taxes, would you recommend an increase or decrease in taxes? If the MPC=0.9, what magnitude of tax change would be appropriate?
Consider the following Keynesian Cross. The AE function decreased from AEO to AE1 due to a decrease in the autonomous consumption Cao to Ca1. What will happen to the simple multiplier effect? AE OR Ob Oe Od 45 AE,a,Y, CA AE,a,Y, Ca The simple multiplier will increase Not enough information to answer the question The simple multiplier will become inverse The simple multiplier will stay the same The simple multiplier will decrease
As shown in Exhibit 2, the marginal propensity to consume (MPC) is: Group of answer choices 0.33. 0.50. 0.67. 0.75.
Analyze the impact of the expenditure multiplier from Keynesian Perspective