Answer to Question #272934 in Math for Thelma 22

Question

An open economy is in equilibrium when

Y = C + I +G + X − M

where

Y =

national

income,

C =

consumption,

I =

investment,

G =

government expenditure,

X =

exports,

M =

imports,

Determine the equilibrium level of income given that

C = .0 5Y + 70 I = 65 G =120 X =120 M = .0 3Y + 40

Answer 1

In equilibrium the level of income is:

$Y = C + I + G + (X - M) = 0.05Y + 70 + 65 + 120 + (120 - 0.03Y - 40) = 335 + 0.02Y,$

0.98Y = 335,

Y = 341.84.