Answer to Question #251777 in Macroeconomics for MSG

Question

Q.4.2 Use the information below to answer the questions below.
C = 400 + 0.6Y
I = 500
Q.4.2.1 Calculate autonomous spending. (2)
Q.4.2.2 Calculate the equilibrium level of income. (4)
Q.4.2.3 Illustrate with the aid of a diagram the equilibrium level income
calculated in Q.4.2.2

Answer 1

4.2.1

Autonomous spending is spending independent of income

Autonomous spending $=C+I$

$=400+500=900$

4.2.2

$Y=AD\\Y=C+I=400+0.6Y+500\\Y=900+0.6Y\\0.4Y=900\\Y=2250$

4.2.3

With autonomous spending A=900