Question

C=300+0.75Y, I=400, G=300,T=100

determine the equilibrium level of the income using expenditure and injection-leakage approach

Answer 1

Solution

$C=300+0.75Y$

$I=400$

$G=300$

$T=100$

The expenditure approach method is given by;

$Y=C+I+G+(X-M)$

Therefore;

$Y=300+0.75(Y-100)+400+300$

$Y=300+0.75Y-75+400+300$

Put like terms together and simplify

$Y-0.75Y=300-75+400+300$

$0.25Y=925$

$Y=\frac{925}{0.25}$

$Y=3,700$