Question

21)
The two ways to view macroeconomic equilibrium in the Keynesian model are	C = S and I = Y. C = Y and S = I. C = I and S = Y. C = T and G = S.

22)
According to the table, at what level of income is the economy in equilibrium?	100 150 200 250

23)
Which of the following formulae is the expression of the multiplier?	a + bY 1/(1-b) 1/(1-b) * (a + I) 1/b

24)
Keynes believed that expansionary fiscal policy was the best response to a period of high unemployment.	true false

25)
What would cause the aggregate expenditures line in the graph to shift upward?	An increase in taxes A government program that increased consumer savings A decrease in government spending An increase in government spending

26)
When NX > 0, it means that we are buying more from foreigners than foreigners are buying from us.	true false

Answer 1

Answer 21:

The two ways to view macro economic equilibrium in the Keynesian model are - C = Y and S= I. This means macro economic equilibrium is established at the point where Consumption is equal to Income and savings is equal to Investment in the economy.

Answer 22:

The table is missing.

Answer 23:

1/1-b. The multiplier in the economy is represented by 1 /1 1-b where b represents the marginal propensity to consume in the economy.

Answer 24:

True. Keynes believed that expansionary fiscal policy by the government will help in increasing the level of aggregate demand which in turn increases production and labor demand in the economy and reduces the level of unemployment in the economy.

Answer 25:

An increase in government spending. Increase in the level of government spending will increase government expenditure which in turn increases the level of aggregate expenditure and shifts the aggregate expenditure curve upwards.

Answer 26:

False. When net exports are greater than zero, this means value of exports is more than value of imports and foreigners are buying more from us than we are buying from foreigners.