Answer to Question #63289 in Macroeconomics for Aisha

Question

Given a hypothetical consumption function of the form:
Y = C + I0 + G0
C = α + β
Where: = Y – T
Y = Income
T = Taxes and that:
Compute the equilibrium level of income and consumption

Answer 1

Y = α + β + (Y – T) + G0
Y = C
α + β + (Y – T) + G0 = α + β
Y = C = T – G0