Podcast
Questions and Answers
In the Keynesian model, what action do firms take to correct the situation when inventories are building up?
In the Keynesian model, what action do firms take to correct the situation when inventories are building up?
- Cut back on production (correct)
- Increase consumption
- Increase investment
- Increase aggregate demand
What is the condition for equilibrium in terms of income and aggregate demand?
What is the condition for equilibrium in terms of income and aggregate demand?
- $Y < AD$
- $Y = AD$ (correct)
- $AD = 0$
- $Y > AD$
At what income level does the economy reach equilibrium in the scenario described?
At what income level does the economy reach equilibrium in the scenario described?
- 720
- 800
- 140
- 400 (correct)
What happens to consumption and saving levels at equilibrium compared to the initial income level?
What happens to consumption and saving levels at equilibrium compared to the initial income level?
Why did firms cut back on production when the economy was not at equilibrium initially?
Why did firms cut back on production when the economy was not at equilibrium initially?
What led to a 'leakage' into saving in the economy initially?
What led to a 'leakage' into saving in the economy initially?
Why did saving decrease at equilibrium compared to the initial level?
Why did saving decrease at equilibrium compared to the initial level?
What happens to aggregate demand and output at equilibrium compared to the initial levels?
What happens to aggregate demand and output at equilibrium compared to the initial levels?
What restores the balance between saving and investing at equilibrium?
What restores the balance between saving and investing at equilibrium?
What caused leakages and injections to become equal again at equilibrium?
What caused leakages and injections to become equal again at equilibrium?
