Consider an economy in which the consumption function takes the following simple algebraic form:

C = 300 + 0.75DI

and in which investment (I) is always $900 and net exports are always -$100. Government purchases are fixed at $1,300 and taxes are fixed at $1,200. Find the equilibrium level of GDP, and then compare your answer to Table and Figure.

FIGURE 2 Construction of the Expenditure Schedule X-IM--$100 6,100 6,000 4,800 $900 3,900 5,200 5,600 6,000 6400 6,800 7,200 Real GDP