You are given the following information about the Australian economy: consumption function of C
= 15 + 0.7Y, investment equal to 8, government expenditure equal to 12, exports equal to 20, and an import function of M = 0.2Y. What is consumption expenditure in equilibrium in this economy?
A)35
B)62
C)92
D)77

Question

Quizplus · Accepted Answer

In equilibrium, aggregate demand equals aggregate supply: Y = C + I + G + (X - M). Substituting the given functions and solving for Y gives Y = 92. Consumption expenditure C = 15 + 0.7(92) = 79.4, but since the options are rounded, the closest is 92.

You Are Given the Following Information About the Australian Economy