Question

a) A hypothetical closed economy has a national income model of the form Y = C + I + G where:

C = 30 + 0.75Y;  and private investment (I) = 70;   and government spending (G) =  150 Compute the equilibrium level of national income for this economy

Answer 1

$$Y=30+0.75Y+70+150$$

$$0.25Y=250$$

$$Y=1000$$