C = 40 + .8Y _
I_g = I_g = 40
_
X = X = 20
_
M = M = 30
Refer to the above information.In equilibrium, the level of consumption is:

Question

C = 40 + .8Y _ I_g = I_g = 40 _ X = X = 20 _ M = M = 30 Refer to the above information.In equilibrium, the level of consumption is: A)$230 B)$320 C)$400 D)$150

Quizplus · Accepted Answer

In equilibrium, Y (income) is where the I_g (planned expenditures) curve intersects with the 45-degree line. Substituting the values given, we get: Y = C + I + G + NX Y = 40 + 0.8Y + 20 + 30 Y - 0.8Y = 90 0.2Y = 90 Y = 450 To find consumption, we substitute the value of Y into the consumption function: C = 40 + 0.8(450) C = 40 + 360 C = 400