In: Economics
According to the simple Keynesian model, state activities belong to a closed economy pages of files in the table:
Y | S | Yd | Ip | G |
2500 | 150 | 2000 | 750 | 500 |
3000 | 200 | 2250 | 750 | 500 |
3500 | 220 | 2470 | 750 | 500 |
4000 | 150 | 2600 | 750 | 500 |
4500 | 200 | 2850 | 750 | 500 |
According to this;
a) Find the level of national income (real product) (Y) that
provides balance in the goods market.
b) According to the table, at what level of national income (Y) is
the unplanned stock investments (IU) negative? This
What are the inventory investments that are not planned at the
national income level? In such a case
Explain how to balance the market.
c) According to the table, at what level of national income (Y) is
the unplanned stock investments (IU) positive? This
What are the inventory investments that are not planned at the
national income level? In such a case
Explain how to balance the market.
NOTE: better explaination for negative IU in part b. - higher level of aggregate demand as compared to aggregate output level means that firms are not producing enough and are running down of their inventories, making IU negative.