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10 marksBasic Keynesian Models

CAPE Economics Unit 2 · 2011 · Paper 2 · Question 1(c)

Using a standard 45° Keynesian cross diagram, explain how equilibrium is reached between actual expenditure (AE) and income (Y).

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Other parts of this question

  1. 1(a)(i)Define the term 'intermediate good'.[2 marks]
  2. 1(a)(ii)Explain why intermediate goods are excluded from the calculation of Gross Domestic Product (GDP).[1 mark]
  3. 1(a)(iii)Explain what is meant by 'value added'.[2 marks]
  4. 1(b)(i)Explain the difference between nominal GDP and real GDP.[2 marks]
  5. 1(b)(ii)Calculate the GDP for the economy for 2008 and 2009.[4 marks]
  6. 1(b)(iii)State, in terms of economic growth, the difference in the economy between 2008 and 2009.[2 marks]
  7. 1(b)(iv)State, in terms of economic growth, the difference in the economy between 2008 and 2010.[2 marks]

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