Explore BrainMass
Share

Explore BrainMass

    Keynesian cross model diagram

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    Using the Keynesian Cross model diagram and equation (Y= C+I+G+X-M), critically and briefly illustrate the short run and long run economic impact of 2005 National Highway and Mass Transit Bill of $300 billion to be spent over the next five years. The impact will be in terms of major macroeconomic variables of US economy.

    © BrainMass Inc. brainmass.com October 9, 2019, 7:37 pm ad1c9bdddf
    https://brainmass.com/economics/keynesian-economics/keynesian-cross-model-diagram-123686

    Solution Preview

    According to the Keynesian Cross model, the expenditure of households, firms, foreigners and the government on domestic goods and services is expressed as E= C + I + G + NX. Consumption (C) can further be expressed as C + b(Y − T ), where b is the marginal propensity to consume, Y is income and T is taxes.

    Thus we have
    E = C + I + G + NX ---> E = C + b(Y -; T )+ I + G + NX

    If we draw a graph of these with expenditure on the vertical axis, equilibrium is represented as a 45-degree line (slope of ...

    Solution Summary

    This solution provides the short and long run economic impact of the 2005 National Highway and Mass Transit Bill through the use of the Keynesian Cross model diagram and equation.

    $2.19