(Solution Document) True, false, explain. In the Keynesian model, the equilibrium level of output is always equal to the full-employment level of output.


True,  false, explain.


a.  In the Keynesian  model,  the equilibrium  level of output is always  equal  to the full-employment level of output.


b.  In the Keynesian  cross diagram,  an increase  in the marginal  propensity  to consume  (MPC)  will decrease the equilibrium  level of output.


c.  In the Keynesian  model,  if firms are experiencing  an  unplanned increase  in their inventory  level production will be decreasing.


d.  In the Keynesian cross diagram,  an increase in government spending G will shift the planned expenditure line down and decrease the equilibrium  level of output.


e.  In the Keynesian  model, the economy is in equilibrium  when the actual  inventory level is smaller than the level firms were planning  to hold.

 







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