The next questions refer to the following simple Keynesian model.
Suppose C = 1000 + .9Y, G = 400, I = 100, (X - IM) = 0, and there are no income taxes.
-The equilibrium level of national income is
A) 15,000
B) 13,500
C) 1,500
D) 5,000
E) 4,500

Question

Quizplus · Accepted Answer

In a simple Keynesian model, the equilibrium level of national income (Y) is determined where aggregate expenditure equals aggregate income. Aggregate expenditure is the sum of consumption (C), investment (I), government spending (G), and net exports (X - IM). Given C = 1000 + 0.9Y, I = 100, G = 400, and (X - IM) = 0, the equation becomes Y = 1000 + 0.9Y + 100 + 400. Solving for Y, we get Y = 15000.

The Next Questions Refer to the Following Simple Keynesian Model