# Income Leakages

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Income Leakages document sample

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4/11/2011
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```							          MBA 6410 - The Simple Keynesian Model in Gordon's Chapter 3
SOLUTION TO PROBLEM ON FIRST MIDTERM
READ ME FIRST - PLACE CURSOR IN CELL B3 TO READ NOTES ON THIS MODEL
Exogenous variables                                                       a                    c          To           t       Io      Go      NXo       nx
Given                                                                  2000                  0.8        1000        0.2     4000     4000      650     0.05
24024     Y = C + I +G+NX
16576     C = a + cYd                                                                                         Equilibrium in Simple Keynesian Model
18220     Yd = Y-R
5805    R=To+tY
1644    S=-a + sYd                                                                                30000

Planned Expenditures; Induced Saving
0.2   s=1-c
4000    Ip = Io                                                                                   25000
4000    G = Go
-551.2    NX = NXo-nxY                                                                              20000
0.41   MLR = s(1-t)+t+nx

(\$billions per year)
2.439    k = 1/(s(1-t)+t+nx)
9850    Induced leakages=sYd+tY+nxY = [s(1-t) + t + nx]Y
15000
9850    Ap = (a-cTo)+Io+Go+NXo
24024     Ep = Ap + c(1-t)Y -nxY                                                                    10000
8650    Leakages = S + R + Imports
8650    Injections = I + G + NXo                                                                   5000
1805    Government Surplus R-G
1805    (I+NX)-S                                                                                        0
0           5000       10000      15000      20000        25000   30000
Real Income (GDP = Y) (\$billions per year)

Ap         Induced leakages               E=Y        Ep (Planned Expenditures)

Y          0     30000           Y      0   30000
Used to draw relevant curves:                                                                            Ap       9850      9850           E      0   30000
Y          0     30000           Y      0   30000
Induced Leakages           0     12300          Ep   9850   27550

```
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