Assume that the economy, as represented by the simple Keynesian model, is in equilibrium with income equal to $6 million and consumption spending equal to $5 million. Which of the following is correct?
A) Investment is $1 million.
B) There is no saving in this economy.
C) The economy will go into disequilibrium because consumption is not equal to income.
D) The information provided is insufficient to determine the level of investment spending.

Question

Quizplus · Accepted Answer

In the Keynesian model, equilibrium occurs when total spending (consumption + investment) equals total income. Since income is $6 million and consumption is $5 million, investment must be $1 million to maintain equilibrium.

Assume That the Economy, as Represented by the Simple Keynesian