Macroeconomics, Keynes 4 sector model

Is it homework? Don't think about it so much, there is a big difference between the job and the real situation, especially in some small aspects.

For example, the increase or decrease of imports and exports in the question you mentioned can be completely ignored, because if business confidence declines, imports and exports will decline, so that although imports and exports will decline, the representation on the chart will be quite complicated! W and J will change, plus C and AE will inevitably move, and all the lines will change, so you can get entangled.

You know that you just need to consider the change of i, and the explanation generally says that the risk of corporate investment will be relatively high, so they will consider reducing this part of the capital.

Secondly, you can consider the change of C, the company's confidence declines, then the employees will also be affected, and the relative gain is that they will not continue to buy luxury goods and the like, so C will decline.

So 2 points are generally enough.

If you continue to think about it, in addition to imports and exports, there will be a decline in s, because you will start depositing first in advance.

The g you mentioned will only change when the GDP falls, and generally ** will not take the initiative to increase the g

The Keynesian crossplot derives the IS curve, and then the IS curve and the LM curve together form the IS-LM model.

The AD curve is then derived from the IS-LM model. The IS-LM model is actually a model used to explain aggregate demand AD, and the Keynesian cross-graph is the basis of the IS-LM model. The details are as follows:

The Keynesian cross diagram first assumes that consumption c, investment i, and **purchase g are exogenous and constant, so that this graph determines the equilibrium output y when the planned expenditure and the actual expenditure are equal, and then let the investment i change with the interest rate r, that is, i=i(r), with the change of r, i follows the change, e=c+i+g moves up and down, resulting in the equilibrium output y following the change, then the equilibrium output y corresponding to each r can be obtained, that is, the change correspondence between y and r, and the is curve can be drawn.

The lm curve is determined by the supply and demand model of the real money balance, first assuming that the supply of the real money balance (m p) s is constant, then its demand (m p) d = l(r, y), that is, the demand (m p) d is a function of r and y, when y changes, l(r, y) moves up and down, so that the equilibrium interest rate r determined by the vertical (m p) s and the downward slope (m p)d changes, then the interest rate r,lm curve corresponding to each y can be found.

Once the IS-LM model is fully constructed, our task is to derive the aggregate demand AD curve from it. First, let's relax the previous assumption that p can change, and then the vertical (m p)s curve will move (assuming that the money supply m is constant), so that the lm curve will move, so that the equilibrium output y determined by the is-lm model will eventually change, so that the equilibrium output y corresponding to each p can be found, and the ad curve about the correspondence between p and y can be drawn.

Word by word. Don't know if it meets your requirements?

According to the above definition, if the enterprise is not confident in the future, then the direct impact is investment I, the decline of investment I will make Y (GDP) decline through the investment multiplier effect, as for C, G and NX are indirect effects, for Nx, the definition of Nx is X-M that is, export-import, if the enterprise is not confident in the future, then the reduction of investment will also reduce the level of production, in the short term, assuming that imports are constant constants, The decline in exports directly leads to a decrease in the net export balance or an increase in the deficit, which also exacerbates the decline in y(GDP). In the medium and long term, C will also be affected, and the confidence between enterprises will affect each other, if there is a chain reaction, then enterprises are bound to reduce production while reducing personnel costs, such as salary cuts, layoffs, etc., which directly affects the income and disposable income of residents, and the reduction of disposable income reduces C, which in turn has an impact on GDP. As for the change in g, it is difficult to discern because ** is generally in the form of headwinds, reducing spending during booms and increasing spending during recessions.

To sum up, I don't know if you are satisfied?

The core of macroeconomics is national income, which is divided into two parts, national income accounting and national income determination theory.

The core of Keynes's theory is the principle of effective demand, which believes that national income is determined by effective demand, and the pillar of the principle of effective demand is the role of three psychological laws: diminishing marginal propensity to consume, diminishing marginal efficiency of capital, and psychological preference for mobility. Marginal propensity to consume, marginal efficiency of capital, money demand and money supply.

Here, Keynes linked the monetary economy and the real economy through interest rates, breaking the neoclassical dichotomy of separating the physical economy from the monetary economy, arguing that money is not neutral, and the equilibrium interest rate in the money market will affect investment and income, and the equilibrium income in the product market will affect the demand for money and the interest rate, which is the interconnection and role of the product market and the money market But Keynes himself did not use a model to link the above four variables together Hansen, Hicks and these two economists used the IS-LM model to put these four variables together to form a theoretical framework for how the interaction between the product market and the money market jointly determines the national income and interest rate, so that Keynes's theory of effective demand can be more perfectly expressed Not only that, the analysis of Keynesian economic policy, that is, fiscal policy and monetary policy, is also circled by the IS-LM model Therefore, it can be said that the IS-LM model is the core of Keynesian macroeconomics.

The Keynesian model is that Keynes made a major revision to bourgeois economics and put forward the so-called theory of "effective demand" in order to enable the bourgeois economy to adapt to the changes in historical conditions under the situation in which various economic contradictions in the period of the great crisis of the capitalist economy were greatly sharpened. The so-called effective demand refers to the aggregate social demand that is expected to bring the greatest profit to the capitalists, which is composed of two parts: consumption demand and investment demand, and is ultimately determined by the three "basic psychological factors" of "consumption tendency", the expectation of future returns on capital assets, and the "liquidity preference" and the quantity of money. Keynes thus explained the outbreak of the economic crisis.

Due to the limitations of Keynes's theory, the developed countries in the West have failed to rely entirely on market regulation. Therefore, there should be appropriate intervention in the market.