Description 
Your goal in this tool is to gain a better understanding of the simple Keynesian cross. In particular, you need to understand how fiscal policy makers can adjust certain variables in order to achieve macroeconomic goals such as full employment.

You have 4 different variables at your disposal: b, G, T, and t.

The first, the marginal propensity to consume, b, is NOT a policy variable. In other words, b cannot be changed by policy makers. It is an important parameter to the model, however, so it is included here to allow you help manipulate the model.

The three remaining variables are all policy tools. An increase in government spending, G, will cause the Aggregate Expenditure(AE) line to shift up, and a decrease in G will cause the AE curve to shift down. An increase in autonomous taxes, T, will decrease consumption (C) and thus AE. A decrease in T will cause an increase in C and also an increase in AE. Changes in the tax rate, t, will cause the slope of C and AE to change.

The Yf slider determines the full employment level of income. The use of this slider is optional and the Yf level is completely up to you. By setting a level of Yf you can consider different expansionary and contractionary gaps and implement different fiscal policies to close those gaps. Try setting Yf and different points and then apploy your knowledge of the Keynesian cross to implement a fiscal policy to close the gaps.
 
 
 
 
 

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