Given the Following Keynesian Model (A) Calculate the Equilibrium Level of Income and Indicate the
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question 24

Short Answer

Given the following Keynesian model:
$\begin{array} { c l } \mathrm { Y } = \mathrm { C } + \mathrm { I } + \mathrm { G } + \mathrm { X } - \mathrm { M } & \mathrm { I } = 250 \\\mathrm { C } = 80 + 0.75 \mathrm { Y } _ { \mathrm { d } } & \mathrm { G } = 100 \\\mathrm { Y } _ { \underline { d } } = \mathrm { Y } - \mathrm { T } & = 200 \\\hline \mathrm { T } = 0.20 \mathrm { Y } & \mathrm { M } = 0.30 \mathrm { Y }\end{array}$
(a) Calculate the equilibrium level of income and indicate the value of the current account balance when the economy is at its equilibrium income level.
(b) Suppose that all equations in the model above stay the same except the size of exports. Calculate the level of exports needed to yield an equilibrium income level that also has X = M, and indicate that resulting equilibrium income level.

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Definitions:

Social Security

A government program that provides financial assistance to people with an inadequate or no income, particularly the elderly, disabled, and unemployed.

Great Depression

A severe worldwide economic downturn that took place during the 1930s, beginning with the stock market crash of 1929, leading to massive unemployment and poverty.

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The collective viewpoints or beliefs shared by the American public on various issues, culture, and policies.

Welfare

Governmental support aimed at ensuring the health, safety, and well-being of the population, often including assistance programs for the economically disadvantaged.