Assume that a closed economy is described by the following relations: Consumption : 

C = 60 + 0.5 Yd Investment (planned ): 

I = 50 Government expenditure: 

G = 70 Taxes: T = 0.2Y whereas Y = total income, 

Yd = Y-T = disposable income. 

i) Calculate the equilibrium income and the deficit (or surplus) of the governmental budget. Show in a diagram the equilibrium of income-expenditure and explain you answer.

Answer rating: 100% (QA)

To find the equilibrium income we need to use the incomeexpenditure equilibrium formula Y C I G wher... View the full answer