Friday-HW - What is demand in this case? What is the change...

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Simple Keynesian Income-Expenditure Model [1]Suppose A = 100, b=3/4 . (a)Find the Keynesian multiplier. (b)Find equilibrium income. Find the exact algebraic value and show how to find the answer graphically. Aggregate ((total) demand for output, d Y , depends upon output (income) itself. The formula is d Y = A +bY , so in this case aggregate demand is d Y = 100 +(3/4) Y . (c)Suppose output is Y=360 widgets. What is demand in this case? What is the change in inventories in this case? What happens to output? Show this in your graph in (b). (d) Suppose output is Y=420 widgets.
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Unformatted text preview: What is demand in this case? What is the change in inventories in this case? What happens to output? Show this in your graph in (b). (e)Suppose there is a decrease in autonomous investment of 36 widgets. (Or $36 in constant dollars), I = -36 widgets. What is the change in equilibrium output? Find the exact numerical change and show how to find the change graphically. (f)Suppose there is a tax cut of 48 widgets (Or $48 constant dollars). T= -48 widgets. What is the change in A ? What is the change in equilibrium output?...
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This note was uploaded on 12/09/2009 for the course ECON 2006 taught by Professor Rdcothren during the Spring '08 term at Virginia Tech.

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