In Macroland,autonomous consumption equals 100,the marginal propensity to consume equals 0.75,net taxes are equal to 40,planned private-sector investment is equal to 50,government purchases are equal to 150,and net exports are equal to 20.Short-run equilibrium output in this economy equals

Question

Quizplus · Accepted Answer

To find short-run equilibrium output, we need to use the following formula:

Y = C + I + G + NX

Where:
Y = Output
C = Consumption
I = Investment
G = Government purchases
NX = Net exports

First, let's find consumption:

C = Autonomous consumption + (Marginal propensity to consume) x (Real disposable income - Net taxes)
C = 100 + 0.75(Y - 40)

Next, we can plug in the values for investment, government purchases, and net exports:

I = 50
G = 150
NX = 20

Now we can substitute the expressions for C, I, G, and NX into the equation for output:

Y = C + I + G + NX
Y = (100 + 0.75(Y - 40)) + 50 + 150 + 20

Simplifying:

0.25Y = 360

Y = 1,440/0.25

Y = 5,760

Therefore, short-run equilibrium output in this economy is $1,160 billion (D).

In Macroland,autonomous Consumption Equals 100,the Marginal Propensity to Consume Equals