If I = $2,000,G = $4,000,T = $1,000,NX = $0,autonomous consumption = $1,000 and the marginal propensity to consume is 0.6,what is the equilibrium value of output?
A) $16,000
B) $7,000
C) $6,400
D) $3,840
E) $8,000

Question

Quizplus · Accepted Answer

The equilibrium value of output is found by solving the following equation:Y = C + I + G + NXwhere:Y is the equilibrium value of outputC is consumptionI is investmentG is government spendingNX is net exportsSubstituting the given values into the equation, we get:Y = 1,000 + 0.6(Y - 1,000) + 2,000 + 4,000 + 0Y = 1,000 + 0.6Y - 600 + 2,000 + 4,000 + 0Y = 6,400Therefore, the equilibrium value of output is $6,400.