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Questions › JNU › JNU SSS 2014 › Q38
2 marks, −0.5Macroeconomics › Keynesian cross and the multiplier › Multiplier extensions: induced investment and class savingModerateabout 2 min

JNU SSS 2014 Question 38: Keynesian cross and the multiplier

Suppose in an economy in any period ttt the aggregate value of output is Y(t)=C(t)+I(t)Y(t) = C(t) + I(t)Y(t)=C(t)+I(t), the sum of aggregate consumption and investment expenditures.

Suppose C(t)=0⋅6Y(t)+0⋅3Y(t−1)C(t) = 0{\cdot}6Y(t) + 0{\cdot}3Y(t - 1)C(t)=0⋅6Y(t)+0⋅3Y(t−1) and I(t)=2⋅4 [Y(t)−Y(t−1)]I(t) = 2{\cdot}4\,[Y(t) - Y(t - 1)]I(t)=2⋅4[Y(t)−Y(t−1)] for all ttt. What is the rate of growth of output in the economy?

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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) = 2·4 [Y(t) - Y(t - 1)] for all t. What is the rate of growth of output in the economy? (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) = 2*4 [Y(t) - Y(t - 1)] for all t. What is the rate of growth of output in the economy?

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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