Consider a simple Keynesian economy described by the following equations:

What is the equilibrium level of output in this economy?

Question

Consider a simple Keynesian economy described by the following equations:

What is the equilibrium level of output in this economy?

BlackTom AI · Accepted Answer

The prompt asks for the equilibrium level of output in a simple Keynesian economy, but there are no answer options provided to compare against. The dataset does contain an answer entry, which shows 6975 as the proposed equilibrium value. Given that limitation, I’ll outline the standard approach and then note what can be inferred from the available data.

First, in a simple Keynesian framework, equilibrium output (Y) occurs where aggregate demand equals output: Y = AD. AD typically combines consumption, investment, government spending, and net exports, often written as AD = C(Y) + I + G + NX. The key mechanism is the multiplier effect: if autonomous spending changes, it induces a larger overall change in Y via the multiplier, given by 1/(1 - MPC) in a basic multiplier model with lump-sum taxes or closed economy assumptions.

Second, without the explicit model parameters (autonomous spending levels, marginal propensity to consume, taxes, and any leakages), it is impossible to reproduce the numeric computation that yields a specific equilibrium like 6975. Normally you would set up the equation Y = C(Y) + I + G + NX, substitute the consumption function (often C = a + bYd, with Yd = Y - T), solve for Y, and obtain the equilibrium numerically.

Third, since there are no answer options present to analyze, we cannot assess the plausibility of alternatives or identify misinterpretations among them. The best-path reasoning would be: verify the model’s consumption function and closure (taxes, imports, etc.), solve the Y = AD equation for Y, and then check the result against the given value.

Fourth, given the data shows 6975 as the answer, if you are meant to confirm that value, you would need to provide the specific C(Y) function and the values for I, G, and NX used in this problem. With those, you could plug into Y = C(Y) + I + G + NX and solve for Y to verify whether 6975 is indeed the equilibrium.

Finally, if any missing parts of the question (such as the exact equations or a list of answer choices) are supplied, we could walk through a precise calculation step by step and compare each option against the derived equilibrium. In the current form, the reasoning centers on the standard equilibrium condition and the necessity of the underlying parameters to compute a numeric result like 6975.

ECON10003_2025_SM1 PRACTICE Pre-Tutorial Quiz 3

Consider a simple Keynesian economy described by the following equations: What is the equilibrium level of output in this economy?

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