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Explain the effects of an unexpected increase in Consumers Expenditure on GNP in an open economy with a government sector using both Keynesian cross and 45 degree diagrams 60 Marks?
Wiki User
∙ 14y ago
An unexpected increase in Consumers Expenditure on GNP has a huge impact on GNP in an open economy country. This is because the increase of consumer expenditure will boost the consumption, and therefore this will enhance the overall productivity of the country. as the output increased, this will result in a reduction of unemployment rate in the country. This will also enhance the disposable income for households, as they have extra money to spend, then this will cause further enhancement of consumption.
Also think about leakages and injection within the economy if people begin spending more on export as GNP rises to make use of cheaper raw materials or goods. injections too- if consumer expenditure increases, firms revenues increase thus giving them the opportunity to finance current and future investments.
Wiki User
∙ 14y ago
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What does investment affect in the keynesian model?
Government expenditure.
What are the four sectors in Keynesian macroeconomic model?
The four sectors in Keynesian macroeconomic model are business, household, foreign sector and government. The Keynesian macroeconomics focuses on a broad scale where the above mentioned sectors play an important role.
What does the Keynesian economic theory suggest?
That the government oversee and regulate the balance of the economy.
What economic school of thought would explain how massive government expenditures during World War 2 sharply moved the country out of the Great Depression?
Keynesian economics.
What is the different between classic and keynesian macroeconomics?
Classical Theory: Government has minimal role in the economy, and the macro-economy is self adjusting; meaning consumers and businesses will correct any problems with the economy automatically over time. Classical theory focuses on long-term goals. Keynesian Theory: Government has a large role in the economy, and focuses on short-term goals. Used mostly in times of recession, government spending is a good way to put money back into the GDP and in turn increase unemployment.
What does investment affect in the keynesian model?
Government expenditure.
What is the 45 degree line in economics?
Its a line lol A guideline used in Keynesian economics in conjunction with the consumption line (to derive saving) and the aggregate expenditures line (to identify Keynesian equilibrium). This guideline forms a 45-degree angle with both the horizontal income axis and the vertical consumption expenditure (or aggregate expenditures) axis in the Keynesian graphical analysis.
What are the four sectors in Keynesian macroeconomic model?
The four sectors in Keynesian macroeconomic model are business, household, foreign sector and government. The Keynesian macroeconomics focuses on a broad scale where the above mentioned sectors play an important role.
What does the Keynesian economic theory suggest?
That the government oversee and regulate the balance of the economy.
What economic school of thought would explain how massive government expenditures during World War 2 sharply moved the country out of the Great Depression?
Keynesian economics.
What is the different between classic and keynesian macroeconomics?
Classical Theory: Government has minimal role in the economy, and the macro-economy is self adjusting; meaning consumers and businesses will correct any problems with the economy automatically over time. Classical theory focuses on long-term goals. Keynesian Theory: Government has a large role in the economy, and focuses on short-term goals. Used mostly in times of recession, government spending is a good way to put money back into the GDP and in turn increase unemployment.
What does Keynesian revolution mean?
Keynesian is an economics term that refers to advocated government monetary and fiscal programs intended to stimulate business activity and increase employment.
What are the determinants of induced consumption in Keynesian model of a closed economy with a government sector?
Income and taxes
What economic theories supports an increase in government spending in order to benefit private industries?
Keynesian theory
Differentiate between New Classical and New Keynesian economics school of thoughts?
the classical believe the economy is best left to itself whereas the keynesian argued that government intervention could improve economic performance
What is the limitation of keynesian investment multiplier?
limitation of keynesian theory??
Did Keynes favor government expenditure did Keynes recommend?
Yes. Government spending that is intended to stimulate growth in an economy and simultaneously lessen the suffering of individuals in times of economic crisis is known as "Keynesian" economic policy. Such policies are fiscal (as opposed to monetary) policies, and are also known as "expansionary" policies. The underlying tenet is that government spending can improve the economy by causing an increase in demand (a shift to the right on an economic supply and demand model).
