Example 7.2
Y=C+I+G+X-Z
Consumption C = 25 + 0.8(Y - T)
Investment I = 75
Government expenditure G = 70
X=30
Z = 0.14Y
T = 0.2Y
-Refer to Example 7.2. The equilibrium level of GDP for this economy is:

Question

Quizplus · Accepted Answer

To find the equilibrium GDP (Y), set Y = C + I + G + X - Z. Substitute the given equations and solve for Y: Y = (25 + 0.8(Y - 0.2Y)) + 75 + 70 + 30 - 0.14Y. Simplifying gives Y = 400.

Example 7.2 Y=C+I+G+X-Z