Finance

Running head: FINANCE
Finance
Name of the University
Name of the Student
Author Note

1FINANCE
Table of Contents
Answer 1:...................................................................................................................................2
Answer 2:...................................................................................................................................3
Answer 4:...................................................................................................................................3
Answer 7:...................................................................................................................................4
Answer 8:...................................................................................................................................5
References:.................................................................................................................................7

2FINANCE
Aggregate Expenditure
National Income
O
Y0
AE= C+I
Y = AE
Answer 1:
The Simple Keynesian Model (SKM) represent a basic point, which represents that a
economy can reach to stable equilibrium through decreasing aggregate demand. At this level,
the economy experiences substantial unemployment as well. At first, this model describes
about the implication of investment and consumption (Murakami 2018). After that, the model
describes the accounting identity, which is, Y= C+I+G. The entire elements determine the
equilibrium level of output. This model is applicable or short-run only, as the model
considers some assumptions. The model considers that capital stock, production techniques
and labour efficiency are fixed in market. In addition to this, the model also assumes that
price level, population size and types of business organisation are constant in market. The
following figure can determine the income level in this SKM.
Figure 1: Simple Keynesian Model
Source: (created by author)
In above diagram, AE represents aggregate expenditure, which represents aggregate
demand at a given price. AE considers both consumption and investment demand. On the