Question #50382

Suppose household consumption is C=100+0.90Y, where Y=income, and investment is 150. Find the equilibrium output and consumption.

Expert's answer

Answer on Question #50382, Economics - Macroeconomics

Assignment

Suppose household consumption is C=100+0.90Y, whereY=income, and investment is 150. Find the equilibrium output and consumption.

Solution

We can write an equation

Y = Equilibrium output = C + I

Y = 100+0.90Y + 150

0.1Y = 250

Y = 2500

Now we can find consumption

C= Consumption = 100+0.90Y

C=100+0.90*2500

C = 2350

Assignment

Suppose household consumption is C=100+0.90Y, whereY=income, and investment is 150. Find the equilibrium output and consumption.

Solution

We can write an equation

Y = Equilibrium output = C + I

Y = 100+0.90Y + 150

0.1Y = 250

Y = 2500

Now we can find consumption

C= Consumption = 100+0.90Y

C=100+0.90*2500

C = 2350

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