Determination of gdp in the cross model, Macroeconomics

Assignment Help:

Q. Determination of GDP in the cross model?

In the cross model, GDP is determined as the solution to the equation YD(Y) = Y

We may explain the determination of Y graphically: 

1722_Determination of GDP in the cross model.png

Figure: Determination of GDP in cross model

All points on the 45-degree line has the same x- and y-coordinates. As we have Y on the x-axis and YD on the y-axis, YD = Y for all points on the 45-degree line. AD curve shows the aggregate demand YD as a function of Y. There is just one level of Y where aggregate demand is equal to Y, point where AD cuts the 45-degree line. This level is known as the equilibrium level of GDP and it is signified by Y*. Formally Y* is defined implicitly by YD(Y*) = Y*.


Related Discussions:- Determination of gdp in the cross model

Differentiate comparative and absolute advantage, What is the difference be...

What is the difference between Comparative Advantage and Absolute Advantage? Difference between Comparative Advantage and Absolute Advantage: Comparative advantage: it is

What is gross national product, What is Gross National Product? Gross...

What is Gross National Product? Gross National Product (GNP): It measures the value of output produced through a country is citizens anywhere within the world, in a speci

What are the equilibrium wage and employment levels, 1. Suppose that the su...

1. Suppose that the supply curve for school-teachers is LS = 20,000 + 350W, and the demand curve for schoolteachers is LD = 100,000 - 150W, where L = the number of teachers and W =

Trade policy - summary, TRADE policy: We are now in a position to sum ...

TRADE policy: We are now in a position to sum up our analysis of India's trade policy. First, India's trade policy has always been very intricately related to India's basic de

Ad curve is the aggregate demand, The AD curve is the aggregate demand ...

The AD curve is the aggregate demand The AD curve is the aggregate demand as a function of P whenthe goods and money market are both in equilibrium

Subsequent withdrawals increase, What is the amount of five equal annual de...

What is the amount of five equal annual deposits that can provide five annual withdrawals, where a first withdrawal of $1500 is made at the end of year six and subsequent withdrawa

Economic cost of your business annually, Suppose that you decide to leave y...

Suppose that you decide to leave your current job(with a salary of $60,000) to start your own business in a building (with a market value of $400,000) you already own. You pay $45,

Farmer grows wheat and sells, A farmer grows wheat and sells it to a miller...

A farmer grows wheat and sells it to a miller for $1; the miller turns the wheat into flour and sells it to a baker for $3; the baker uses the flour to make bread and sells the bre

Show the changes in the exchange rate, Q. Show the Changes in the exchange ...

Q. Show the Changes in the exchange rate? Assume that United States is our home country and the current euro exchange rate in direct notation is SD = 1.5 (euro/USD). In indirec

Events x and y are mutually exclusive, The events X and Y are mutually excl...

The events X and Y are mutually exclusive. Suppose P(X)=.05 and P(Y) =.02. What is the probability of either X or Y occurring? What is not probability of X nor Y happens?

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd