# National After – tax Consumption | It G +’x Minus Aggregate Income Income* Imports Expenditures \$8, 000 \$4, 340 \$9, 000 \$10, 000 \$11, 000 \$12, 000

KEYNESIAN CROSS DIAGRAM

Please find below the the full solution of the following problem .

I would like to know all the calculations necessary to

-fill te table

-solve for Y

-Understand the relation with the keynesian theory

Thank you

1.               The chart below represents the data behind a Keynesian cross diagram. Assume that the tax rate is 0.4 of national income; the MPC out of the after-tax income is 0.8; investment is \$2,000; government spending is \$1,000; exports are \$2,000 and imports are 0.05 of after-tax income. What is the equilibrium level of output for this economy?

Solution: The following table illustrates the completed table. The equilibrium is level is italicized.    We can solve for Y, where Y = National Income using:

Y=AE= C + I + G + X – M

Y = \$500 +0.8(Y-T) + \$2,000 + \$1,000 + \$2,000 – 0.05 (Y – T)

Solving for Y, we see that the equilibrium level of output is Y = \$10,000.

• Attachment 1
• Attachment 2

NationalAfter – taxConsumption | It G +’xMinusAggregateIncomeIncome*ImportsExpenditures\$8, 000\$4, 340\$9, 000\$10, 000\$11, 000\$12, 000\$13, 000