JNU SSS 2014 Question 37: Keynesian cross and the multiplier
Suppose in an economy in any period t the aggregate value of output is Y(t)=C(t)+I(t), the sum of aggregate consumption and investment expenditures.
Suppose C(t)=0⋅6Y(t)+0⋅3Y(t−1) and I(t)=600+0⋅1Y(t) for all t and Y(0)=40000. What is the rate of growth of output in the economy in period 1?
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Suppose in an economy in any period t the aggregate value of output is Y(t) = C(t) + I(t), the sum of aggregate consumption and investment expenditures. Suppose C(t) = 0·6Y(t) + 0·3Y(t - 1) and I(t) = 600 + 0·1Y(t) for all t and Y(0) = 40000. What is the rate of growth of output in the economy in period 1? (A) 2% (B) 5% (C) 7·5% (D) 12%
Also written as: Suppose in an economy in any period t the aggregate value of output is Y(t) = C(t) + I(t), the sum of aggregate consumption and investment expenditures. Suppose C(t) = 0*6Y(t) + 0*3Y(t - 1) and I(t) = 600 + 0*1Y(t) for all t and Y(0) = 40000. What is the rate of growth of output in the economy in period 1?
Keynesian cross and the multiplier has come up 167 times in 7 exams since 2006.
What this question tests
This question is on Multiplier extensions: induced investment and class saving, part of Keynesian cross and the multiplier in Macroeconomics.
The multiplier when investment responds to income or when groups have different saving behaviour.
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