Question #56353

Given a hypothetical economic model of the form:
Y = C + I0 + G0
C = α + β
Where: = Y – T
Y = Income
T = Taxes and that:
Compute the equilibrium level of income and consumption

Expert's answer

If Y = C + I0 + G0, C = α + β(Y - T),

then the equilibrium level of income will be Y = α + β(Y - T) = I0 + G0 and consumption C = α + β(Y - T) = Y - I0 - G0

then the equilibrium level of income will be Y = α + β(Y - T) = I0 + G0 and consumption C = α + β(Y - T) = Y - I0 - G0

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