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	Y_d	I_p	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.

Rahul Sunny answered 1 year ago

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