Answer to Question #123637 in Macroeconomics for Samuel Owusu

Question

Given C=1500+0.75y
I=Io=2500
Find the equilibrium income

Answer 1

At equilibrium;

Aggregate demand = Aggregate output

Z = Y

C = 1500 + 0.75y

I = Io = 2500

Therefore;

Y = 1500 + 0.75(Y-T) + I + G

Y = 1500 + 0.75Y + 2500 + 0

Y - 0.75Y = 4000

0.25Y/0.25 = 4000/0.25

Y = 16,000

Therefore;

Where Z = Y, the level of equilibrium is at 16, 000.