17. Consider the following income/expenditure diagram in the simple Keynesian model. C,I,G, (S,T) Y=C+S+T C+I+G At Yo. the situation in the output market would be a. equilibrium b. excess demand (shortage) c. excess supply (surplus) d. one in which we would expect output to increase in the future. e. none of the above.

In the Keynesian model, is aggregate expenditure (AE) exceeds total production an unintended _________ will occur and business will __________. a) inventory reduction; increase production b) inventory reduction; decrease production c) inventory reduction; not change production d) inventory accumulation; decrease production e) inventory accumulation; increase production

2. A tabular approach to Keynesian equilibrium The following table shows some information on a hypothetical economy. The table lists real GDP, consumption (C), investment (I), government spending (G), net exports (X-M), and aggregate expenditures (AE). In this problem, assume that investment, government spending, and net exports are independent of the economy's real GDP level. X- Unplanned Inventory Real GDP C I G M AE Investment Direction of Real GDP and Employment $500 $300 $80 $60 $85 -$25 $600 $ $80 $60 $85 $600 $0 $700 $450 $80 $60 $85 $25 $800 $80 $600 $80 $60 $85 $60 $750 $50 $85 $825 $75 Using the numbers provided in the table, enter the correct numbers in the empty cells. Then, using the dropdown selection menus in the right-most column, indicate whether output will tend to increase, decrease, or remain in equilibrium at each level of real GDP in the table. (Note: The table uses negative numbers to indicate an unplanned inventory investment depletion and positive numbers to…

Assume the Canadian economy is currently at equilibrium. a. Using a correctly labeled aggregate demand and supply graph, show Full employment output (yf)    Current price level (PL1)    b. World War III breaks out and Canada has to get involved. The Prime Minister chooses to increase the military budget by 40%. On your graph from part A, show what will happen in the economy, labeling the new equilibrium as Q2, PL2. c.  Using a correctly labeled graph of the loanable funds market, show how the Prime Minister’s decision will affect the economy.