Consider a Closed Economy to Which the Keynesian-Cross Analysis Applies

question 72

Essay

Consider a closed economy to which the Keynesian-cross analysis applies. Consumption is given by the equation C = 200 + 2 / 3 (Y - T). Planned investment is 300, as are government spending and taxes.
a.If Y is 1,500, what is planned spending? What is inventory accumulation or decumulation? Should equilibrium Y be higher or lower than 1,500?
b.What is equilibrium Y?
c.What are equilibrium consumption, private saving, public saving, and national saving?
d.How much does equilibrium income decrease when G is reduced to 200? What is the multiplier for government spending?

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Definitions:

Wealth

The abundance of valuable resources or material possessions.

Labor

The work performed by individuals that contributes to the production of goods and services in an economy, often in exchange for wages.

Free Enterprise

An economic system where private business operates with minimal government regulation, emphasizing competition and consumer choice.