Answer to Question #59325 in Economics of Enterprise for Azliza

Question

Given that:
G=20
I=35
C=0.9Yd+70
T=0.2Y+25

Calculate the balance of national income.

Answer 1

If G = 20, I = 35, C = 0.9Yd + 70, T = 0.2Y + 25 and Yd = Y - T, then the balance of national income (or GDP) is:
Y = C + I + G = 0.9Yd + 70 + 35 + 20 = 0.9*(Y - 0.2Y - 25) + 125 = 0.72Y - 22.5 + 125 = 0.72Y + 102.5;
Y = 0.72Y + 102.5;
0.28Y = 102.5;
Y = 366.07.