Consider an economy with the following behavioral equations:

 

a) Solve for equilibrium GDP (Y)

b) Solve for equilibrium disposable income  

c) Solve for consumption spending (C)

d) How suppose that G increases to 150. Solve for the equilibrium values of Y, C, and private saving (S = Y - T - C). Does public saving (T - G) plus private saving equal investment (I)? In other words does Y = C + I + G?
 
 
 
 
 

Transcribed Image Text:

C I = 50 G = 100 T = 100 100+ 0.5Yd C I = 50 G = 100 T = 100 100+ 0.5Yd

Answer rating: 100% (QA)

a The equilibrium is at YCIG YdYT Using the equations ... View the full answer