in the keynesian model equilibrium national income\na. occurs when the marginal propensity to consume equals…

in the keynesian model equilibrium national income\na. occurs when the marginal propensity to consume equals the multiplier.\nb. equals planned consumption, investment, government, and import expenditures.\nc. equals planned consumption, investment, government, and net export expenditures.\nd. occurs at the point where the consumption function crosses the 45 - degree line.\nif real gdp falls below total planned expenditures the economy will see\na. production decreases and employment increases.\nb. production increases and employment decreases.\nc. production and employment increases.\nd. production and employment decreases.

in the keynesian model equilibrium national income\na. occurs when the marginal propensity to consume equals the multiplier.\nb. equals planned consumption, investment, government, and import expenditures.\nc. equals planned consumption, investment, government, and net export expenditures.\nd. occurs at the point where the consumption function crosses the 45 - degree line.\nif real gdp falls below total planned expenditures the economy will see\na. production decreases and employment increases.\nb. production increases and employment decreases.\nc. production and employment increases.\nd. production and employment decreases.

Answer

Brief Explanations:

  1. In the Keynesian model, equilibrium national income is where aggregate expenditure (planned consumption + investment + government + net - export expenditures) equals national income. Option C is correct as it correctly states the components of aggregate expenditure. Option A is wrong because the marginal - propensity to consume and the multiplier are related but not equal at equilibrium. Option B is incorrect as it mentions import expenditures instead of net - export expenditures. Option D refers to the break - even point of the consumption function, not equilibrium national income.
  2. When real GDP falls below total planned expenditures, inventories will fall. Firms will increase production to meet the higher demand, which will lead to an increase in employment. So, production and employment will increase, making Option C correct.

Answer:

  1. C. equals planned consumption, investment, government, and net export expenditures.
  2. C. production and employment increases.