Question #65894

How do I calculate equilibrium national income when given? For example:

I=500 , Autonomous Consumption c= 100, marginal propensity to income b= 0.5 , G= 400 ,(X-M)= 1000

I=500 , Autonomous Consumption c= 100, marginal propensity to income b= 0.5 , G= 400 ,(X-M)= 1000

Expert's answer

If you need calculate equilibrium national income, we can use this formula:

Y= C+I+G+(X-M), where C= a+b*Y.

For example: we have I=500 , a= 100, b= 0.5, G= 400 ,(X-M)= 1000 that`s why

Y = 100+0,5*Y+500+400+1000

0,5Y=2000

Y=4000

ANSWER: Y=4000.

Y= C+I+G+(X-M), where C= a+b*Y.

For example: we have I=500 , a= 100, b= 0.5, G= 400 ,(X-M)= 1000 that`s why

Y = 100+0,5*Y+500+400+1000

0,5Y=2000

Y=4000

ANSWER: Y=4000.

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