0 ratings0% found this document useful (0 votes) 56 views7 pagesChapter 28 Calculations
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Keynesian Mode\
helps to determine the level of production (output)
and
level of Income.
femember —*
4g. Socks
je. we use INPUTS fo make oOuTPeUT
TF you think about this on a macro —seale (the
whele country) then, all the money spent on the
inputs = AGGREGATE SPENDING
and all the output = TOTAL PRODUCTION
G fensumers are te be able to _buy all that is
produced y they wil need the equivalent amount of
income)
it, AGGREGATE _ Acceeqare = AGGREGATE
SPENDING INCcomMEe DEMAND
4 y +
A y C#I+G + (x-m) This is. the model
the econom
in equilibrium 3 ae
eee Pid (on a high level
A-Y=C+L+G+(x-m)
calculate val
the Following
is 0,75
A Rictidies economy — has
consume
is 8550 million
tox on income
reported data +
+ Marginal Propensity te
= Autonomous consumption
sTox rate ic 20%, proportional
* Government spending is Ruoo million
slouestment ig R350 million
is RAS milWon
snet autonomous exports
R3500_ milion
“Ful employment level income is.
Vwhat is the value of A?
2) Calculate tne value of the multiplier
:
level of incomes
3) What is the eqyililorium
4) What is the equilibria level of consumption?
5) Calculate the amount of gouernment spending necded to
full employment.
bring the economy to
STEP | \ Ust the values given consume Se oF
earn,
wie
Ri aney
every
Pos
additional
mec os 0,15
Represent AUTONOMOUS with & line over
E = 580 mil Ete tether
always convert a percentage rate when
LF 02 © ~~ ~~ using in a calculation it, 207, 2 22 = 0,2
= WoO mil
T= 250 mit
CX A)\= 25 ay eae SY UMS Gerke tnpicks
= 3500 mil
recall that
A= CHL EG EGA
Se when you only wank
KR , you add all the
autonomous values ONLY
@ tin nap a te & The Multiplier)
eoonow nso In an
with ecanees economy
wrt GOVERN MENT
No Government WITH GoveRNmen ee en
\ \ With FOREIGN SECTOR,
—— —_——_
ol=7-e A=cets fe
7 : 1-c (it) +m
latte ‘o” ” wee : Witla “ot a
c = MPC t= tox rote mez *
= marginal propen si+y
ie to ienport.
In this example, we hove beer given t+ ond 1"
trere fore we se pet
’
ae ec (eX) \ er
I= O45 (1- 0,2)
@ we have a formula te Find the Jequililo. level of fincome.
ie Col ) (A)
(2,5)(1325)
=h3 312, Smillion
—_—___ S
(4) calculate — the
we need the
I
consumption substitute
function, then
Neauitip for the.
value of Y. The answer = Consumption
at Yequitib
Finding the
cons#mption
functions Lo
ot
¥
-- 7% Income
J
Autonoméus
con sydaption
y tne ie de
om fs aon /
tanh
Y= Nequitiy® 83312,5 mil Fauncrio
C= s50 A¥ (0,75(2213,5)
4 38 Asame tion BD cqnilib.
= 303 = =
ne Se ee
Cz sso +
substitute ® _
EC Cab C
Mic
G = S§o+401S Coa) 3312 sg
Cr S$ Soros Co.8s) 8312.5
C= Sso4 (0.60) 3812.8
C2 SSO 4 1987.5
C= RKasns Ci) ® amount of & — netded
to Fall employment.
the Situation in the
Economy where
FULLY
the
used
EMPLOYED
For
are
being
ie.
Furry
The economy will be producing
Possible situation
ve iE the
at
will
a
economi
equilibrium
be
certain.
v
Vee
is
it
producin
ornoun®)
Tus it makes sense
that RYequttip
and the difference”
berween these x
is the amount needed \
' 40 bring the
Fito rau
1 from
\
economy 1 .
EMPLOYMENT : eee
Equinarium |
to
a)
bring the econo my
Cinputs)
(most
ef ficient)
at its MAX = poTENTIAL
Possible situation
if
at
wilt
the — econemy
fall employment, i+
be
certain
‘
Ye
producing
a
amount
= what is actualy produced
ging = what could potentially be produced.
N
we
a)
fo calculate the
to bring the oo
Gr bring eco
amount
f
mes meet Ae
We use the below formula to calculate AG needed
for fall employment =
AY = (AG) (a)
ah AY = (AG\(4) sa divide beth sides
by a
AY. (ae
cae
iN Geeta
ol
= Yruw — Yeauitis
a
recall: Yrut 3500
= 3500 ~ 3312,5
eteia Siena quilts = 3312,5
_ 1875
Ps
= RFS mill
———
