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. At the equilibrium level of output in Norway, consumption equals

Question

Quizplus · Accepted Answer

To find the equilibrium level of output, we need to set Y = AD (where Y represents output and AD represents aggregate demand). 
AD = C + I + G + NX (where NX, or net exports, is assumed to be zero in this case) 
Substituting the given values, we get: 
AD = (100 + 0.8Yd) + 200 + 500 + 0 = 800 + 0.8Yd 
At equilibrium, Y = AD: 
Y = 800 + 0.8Yd 
0.2Yd = 200 
Yd = 1000 
C = 100 + 0.8Yd = 900 
Therefore, at equilibrium, consumption equals 900, which is option B.

The Norwegian Economy Can Be Characterized by Equation 9