The Italian economy can be characterized by Equation 9.1.
EQUATION 9.1:
C = 300 + 0.8Yd
G = 400
T = 200
I = 200
-Refer to Equation 9.1. At the equilibrium level of output in Italy, saving equals

Question

Quizplus · Accepted Answer

At equilibrium, Y = C + I + G. Disposable income Yd = Y - T. Saving S = Yd - C. Solving for Y gives Y = 300 + 0.8(Y - 200) + 200 + 400. Solving this, Y = 3000. Yd = 3000 - 200 = 2800. C = 300 + 0.8(2800) = 2500. S = 2800 - 2500 = 300. However, since I = 200, S = I at equilibrium, so S = 400.

The Italian Economy Can Be Characterized by Equation 9