Answer to Question #274560 in Microeconomics for Fawn

Question

S=-120 + 0.25y investment level is $400 determine the equilibrium level using the savings/investment approach to equilibrium.

Answer 1

Solution:

Under this approach, equilibrium is where: S = I

-120 + 0.25Y = 400

0.25Y = 400 + 120 = 520

0.25Y = 520

Y = 2,080

The equilibrium level = 2,080.