The Canadian economy can be characterized by Equation 9.2.
EQUATION 9.2:
C = 500 + 0.5Yd
Taxes = 600
Equilibrium Output = $4,000
-Refer to Equation 9.2. At equilibrium, saving in Canada equals

Question

Quizplus · Accepted Answer

At equilibrium, total output (Y) is equal to total spending. Given the equilibrium output of $4,000, we can calculate disposable income (Yd) as Y - Taxes = $4,000 - $600 = $3,400. Plugging Yd into the consumption function (C = 500 + 0.5Yd), we get C = 500 + 0.5(3,400) = 500 + 1,700 = $2,200. Since at equilibrium, output (Y) equals consumption (C) plus saving (S), and Y = C + S, we can solve for S: $4,000 = $2,200 + S, which gives us S = $1,800. However, this calculation does not directly lead to the correct answer among the provided options, indicating a need to reassess the approach based on the given options and the typical methodology for calculating savings in an economy. Given the oversight in the initial explanation, the correct approach involves understanding that savings can also be calculated as the difference between disposable income and consumption. With disposable income (Yd) at $3,400 and consumption (C) at $2,200, savings should be Yd - C = $3,400 - $2,200 = $1,200, aligning with option A. This correction addresses the mistake in the initial calculation process.

The Canadian Economy Can Be Characterized by Equation 9