Table 13.1.Canada's Saving,Investment,Import,and Export Functions (in billions of dollars) Under a System of Fixed Exchange Rates
Export Function X = 3000
Investment Function I = 1000
Saving Function S = -1000 + 0.2Y
Import Function M = 500 + 0.25Y
-Referring to Table 13.1,Canada's equilibrium level of income is:
A) $8000 billion
B) $9000 billion
C) $10,000 billion
D) $11,000 billion

Question

Quizplus · Accepted Answer

To find the equilibrium level of income, set savings (S) plus imports (M) equal to investment (I) plus exports (X). Solve the equation: -1000 + 0.2Y + 500 + 0.25Y = 1000 + 3000. Simplifying gives 0.45Y - 500 = 4000. Solving for Y gives Y = 10,000 billion.

Table 131Canada's Saving,Investment,Import,and Export Functions (In Billions of Dollars) Under a a System