Question

In: Economics

Suppose that the economy is characterized by the followingbehavioral​ equations:C​ =150150​+0.700.70YDI ​= 150150...

Suppose that the economy is characterized by the following behavioral equations:

C =150150+0.700.70YD

I = 150150

G = 120120

T = 110

Equilibrium GDP(Y)=nothing.(Round your response to two decimal places.)

Solutions

Expert Solution

Solution :

Given :

​C =150150​ + 0.70YD

I ​= 150150

G​ = 120120

T​ = 110

We know, Y = C + I + G

Equilibrium GDP (Y)= consumption (C) + investment (I) + government spending (G)

We have , Disposable income YD = Y-T

So, Y = 150150​ + 0.70(Y-110) + 150150 + 120120 = 420420 + 0.70Y- 77

Y = 420343 + 0.70Y

Y = 420343 + 0.70Y

0.30Y = 420343

Y = 420343/0.30

Y = 1,401,143.33

So, equilibrium GDP = ($ 1,401,143.33)

Disposable income = Y-T = 1,401,143.33 - 110 = 1,401,033.33

Consumption spending = C​ = 150150​ + 0.70YD

= 150150​ + 0.70*1,401,143.33

= 150150 + 980,800.33

= 1,130,950.33

Rahul Sunny answered 2 years ago
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