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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