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 equilibrium real GDP for this economy?

Question

Quizplus · Accepted Answer

The equilibrium GDP is found where aggregate demand equals aggregate supply: Y = C + I + G + (X - M). Substituting the given functions and values: Y = (15 + 0.7Y) + 8 + 12 + 20 - 0.2Y. Simplifying gives Y = 55 + 0.5Y. Solving for Y gives Y = 110.

You Are Given the Following Information About the Australian Economy