At equilibrium in the simple Keynesian model,income is $6 million and consumption spending is $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 simple Keynesian model, equilibrium is reached when aggregate spending (consumption + investment) is equal to income. Given that income is $6 million and consumption spending is $5 million, the remaining $1 million must be investment spending. Therefore, choice A is correct. Choice B is incorrect as there is saving in the economy ($6 million - $5 million = $1 million). Choice C is incorrect as the given information indicates that consumption is equal to income at equilibrium. Choice D is also incorrect as the level of investment spending has been determined to be $1 million.

At Equilibrium in the Simple Keynesian Model,income Is $6 Million