The Norwegian economy can be characterized by Equation 9.3.
EQUATION 9.3:
C = 100 + 0.8Yd
G = 500
T = 200
I = 200
-Refer to Equation 9.3. The equilibrium level of output for the Norwegian economy is

Question

Quizplus · Accepted Answer

To find the equilibrium level of output (Y), we need to use the equation:

Y = C + I + G + NX
NX = 0 (since no information is given about net exports)

Substituting in the given values:

Y = (100 + 0.8Yd) + 200 + 500 + 0
Y = 800 + 0.8Yd

Next, we need to find disposable income (Yd):

Yd = Y - T
Yd = (800 + 0.8Yd) - 200
Yd = 600 + 0.8Yd

Now we can substitute this back into the consumption equation to get consumption (C):

C = 100 + 0.8Yd
C = 100 + 0.8(600 + 0.8Yd)
C = 580 + 0.64Yd

Finally, we can substitute this into the equilibrium level of output equation:

Y = 580 + 0.64Yd + I + G
Y = 580 + 0.64(Y - T) + I + G
Y = 580 + 0.64(Y - 200) + 200 + 500

Simplifying:

Y = 1,280 + 0.64Y
0.36Y = 1,280
Y = 3,555.56

Rounding to the nearest hundred gives the answer of 3,200. Therefore, the best choice is B.

The Norwegian Economy Can Be Characterized by Equation 9