Macro Foundations · intermediate
What moves on the Keynesian Cross diagram
Stronger foreign demand raises autonomous net exports, shifting planned expenditure up and raising equilibriumequilibriumThe point where opposing forces balance, quantity supplied equals quantity demanded, so there's no pressure for price to change. income through the same multipliermultiplierThe amount total output changes per dollar of initial spending change, powered by respending: 1/(1−MPC) in the simplest case. process as domestic injections.
Planned expenditure includes net exports, so foreign demand counts as an injection.
A commodity boom means overseas buyers want far more of what this economy produces.
The expenditure line shifts up, just as it would for government spending.
The multipliermultiplierThe amount total output changes per dollar of initial spending change, powered by respending: 1/(1−MPC) in the simplest case. does not care where the injection came from. What matters is that it was autonomous, not caused by domestic income.
Examiners ask this as: export boom, net exports, commodity prices, overseas demand, injection.
Other scenarios on Keynesian Cross