Question

In: Economics

According to the simple Keynesian model, state activities belong to a closed economy pages of files...

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.

Solutions

Expert Solution

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.


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