Question #63555

Given a hypothetical consumption function 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

Solution:

Y = α + β + (Y – T) + G0

Y = C

α + β + (Y – T) + G0 = α + β

Y = C = T – G0

Y = α + β + (Y – T) + G0

Y = C

α + β + (Y – T) + G0 = α + β

Y = C = T – G0

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