co 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 ———