Consider the following information describing an economy with demand-determined output.There is no government or foreign trade.All dollar figures are in billions.
1.equilibrium condition is Y = C + I
2.marginal propensity to save = 0.20
3.the autonomous part of C is $50
4.investment is autonomous and equals $25
TABLE 21-5
-Refer to Table 21-5.The equilibrium level of national income is
A)$375.
B)$249.
C)$155.
D)$75.
E)$93.75.

Question

Quizplus · Accepted Answer

The marginal propensity to save is 0.20, so the marginal propensity to consume is 0.80. The consumption function is C = 50 + 0.80Y. The equilibrium condition is Y = C + I, so Y = 50 + 0.80Y + 25. Solving for Y gives Y = 375.

Consider the Following Information Describing an Economy with Demand-Determined Output