EBK ECONOMICS
13th Edition
ISBN: 8220106798607
Author: Arnold
Publisher: CENGAGE L
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Chapter 10.3, Problem 2ST
To determine
Changes in real
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In an economy, marginal propensity to consume (MPC) is 0.75 where Keynesian model works. Now, if government increases both its expenditure and taxes by 1000, then Income increases by 4000; Income increases by 3000; Income increases by 1000; Income do not change?
According to the Keynesian cross model, if the marginal propensity to consume is 0.75, by how much (i.e. how many billion
dollars) will income increase if the government increases government purchases by $120 billion?
Hint: Enter only the number of billions and no dollar sign in your response (e.g. enter only '100' in the case of $100 billion).
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What is the philosophical, economic essence of Keynesian doctrine or “Keynesianism” that emerged from the experience and attempted explanations of the Great Depression ? What would all Keynesians believe, in order to be “Keynesian?”
Chapter 10 Solutions
EBK ECONOMICS
Ch. 10.1 - Prob. 1STCh. 10.1 - Prob. 2STCh. 10.1 - Prob. 3STCh. 10.2 - Prob. 1STCh. 10.2 - Prob. 2STCh. 10.2 - Prob. 3STCh. 10.3 - Prob. 1STCh. 10.3 - Prob. 2STCh. 10.3 - Prob. 3STCh. 10.4 - Prob. 1ST
Ch. 10.4 - Prob. 2STCh. 10 - Prob. 1QPCh. 10 - Prob. 2QPCh. 10 - Prob. 3QPCh. 10 - Prob. 4QPCh. 10 - Prob. 5QPCh. 10 - Prob. 6QPCh. 10 - Prob. 7QPCh. 10 - Prob. 8QPCh. 10 - Prob. 9QPCh. 10 - Prob. 10QPCh. 10 - Prob. 11QPCh. 10 - Prob. 12QPCh. 10 - Prob. 13QPCh. 10 - Prob. 14QPCh. 10 - Prob. 15QPCh. 10 - Prob. 16QPCh. 10 - Prob. 17QPCh. 10 - Prob. 18QPCh. 10 - Prob. 19QPCh. 10 - Prob. 20QPCh. 10 - Prob. 21QPCh. 10 - Prob. 22QPCh. 10 - Prob. 23QPCh. 10 - Prob. 24QPCh. 10 - Prob. 25QPCh. 10 - Prob. 1WNGCh. 10 - Prob. 2WNGCh. 10 - Prob. 3WNGCh. 10 - Prob. 4WNGCh. 10 - Prob. 5WNGCh. 10 - Prob. 6WNGCh. 10 - In the accompanying figure, explain what happens...Ch. 10 - Prob. 8WNG
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- Consider a simple Keynesian model. Which of the following will decrease planned aggregate expenditure? Government closes schools as a part of major restructureHouseholds prefer homemade meals to restaurant mealsAll the other optionsBusiness profitability is expected to go downarrow_forwardUse the Keynesian Cross model to show an economy in a recession. Label all key points.arrow_forwardIn the Keynesian cross model, assume that the consumption function is given by C = 100 + 0.75(Y - T). If government spending increases by AG = 100, what is the increase in output? How does your answer change when the spending increase is financed by an equal increase in taxes?arrow_forward
- What roles does inventory play in the equilibrium process of the economy in a simple Keynesian modelarrow_forwardThe multiplier in the Keynesian model equals:arrow_forwardGiven the following information on spending in a simple Keynesian model what is the level of autonomous spending? CA = 800 GA = 600 IA = 400 MPC =2/3 XA =500 MA =300arrow_forward
- Explainarrow_forwardSuppose total expenditures are greater than total output: that is, E > Y. Draw a diagram illustrating this situation. According to Keynesian theory, what is likely to happen? Will the adjustment necessarily restore full employment?arrow_forwardIn the Keynesian Cross model, an increase in government purchases by one unit would generate an increase in output by less than one unit. True or Falsearrow_forward
- In the Keynesian model (that is, the short run), what causes recessions?arrow_forwardExplain the relationship between consumption and saving in the Keynesian model.arrow_forwardWhat would a Keynesian likely recommend in response to a recession? What would a neoclassical likely recommend? Why would a Keynesian policy response not make much sense in response to a minor recession like the one that occurred in 1990? What would be the cost of letting the economy adjust by itself to a new long run equilibrium?arrow_forward
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