In Macroland,the components of planned aggregate expenditure are given by:
C = 100 + 0.9(Y - T)- 500r
I = 150 - 1,000r
G = 200
NX = 50
If net taxes equal 100 and the central bank sets the interest rate to equal 0.04 (4%),what is short-run equilibrium output?
A) 3,200.
B) 3,350.
C) 3,500.
D) 3,650.
E) 3,800.

Question

Quizplus · Accepted Answer

To find the short-run equilibrium output, we need to set aggregate expenditure equal to output:

Y = C + I + G + NX

Substituting the given equations:

Y = (100 + 0.9(Y - 100) - 500(0.04)) + (150 - 1,000(0.04)) + 200 + 50

Simplifying:

Y = 3,500

Therefore, the short-run equilibrium output is 3,500, which is answer choice C.

In Macroland,the Components of Planned Aggregate Expenditure Are Given By