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Government revenue, government spending and net exports
G, NT and NX are exogenous variables in the classical model
In the classical model (and in most macroeconomic models) government spending and net taxes are presumed to be exogenous variables determined by the government.
Net Exports NX is also an exogenous variable that means both imports Im and exports X are exogenous variables. Exports are determined by rest of the world and this variable is exogenous in most macro models. It's possible to presume that imports depend on real interest rate by the same arguments we used for consumption. It would be possible to modify classical model such that imports depended on real interest rate though results would be largely the same. Consequently we presume that imports are exogenous as well.
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how do i calculate how much the gorverment should spend if the MPC is 0.8 and 200million is requered to reach full employment ?
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Using Simple Keynesian Model, discuss the effect of the following: a) An increase in govt. expenditure. b) A decrease in lump sum taxes. In this context compare the govt.
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