Answer to Question #127900 in Macroeconomics for Brian Obadiah

Question #127900
A hypothetical closed economy has a national income model of the form y=C+I+G where C=30+0.8Y and I and G and private Investment expenditure are exogenously determined to= 50 and 80 units respectively. Compute the national equilibrium level of income for this economy using aggregate income equal aggregate expenditure and withdrawals and equal injection methods
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Expert's answer
2020-07-30T11:09:57-0400

1.Using aggregate income equal aggregate expenditure method:

Y=C+I+GY=C+I+G

Y=30+0.8Y+50+80Y=30+0.8Y+50+80

Y0.8Y=30+50+80Y-0.8Y=30+50+80

0.2Y=1600.2Y=160

Y=1600.2Y=\frac{160}{0.2}


Y=800Y=800


2.Using withdrawals and equal injection method:

Value  of  withdrawals=Value  of  injectionsValue \; of \; withdrawals=Value \; of\; injections

Savings=Investment+Government  expenditureSavings=Investment+Government \; expenditure

YC=I+GY-C=I+G

Y300.8Y=50+80Y-30-0.8Y=50+80

Y0.8Y=50+80+30Y-0.8Y=50+80+30

0.2Y=1600.2Y=160

Y=1600.2Y=\frac{160}{0.2}


Y=800Y=800


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