The Peruvian economy can be characterized by Equation 9.4.
EQUATION 9.4:
C = 400 + 0.6Yd
Taxes = 600
Equilibrium Output = $4,000
-Refer to Equation 9.4. At equilibrium, saving in Peru equals

Question

Quizplus · Accepted Answer

To find the savings at equilibrium, we first need to calculate disposable income (Yd) and consumption (C). Given that the equilibrium output (Y) is $4,000 and taxes are $600, disposable income (Yd) is Y - Taxes = $4,000 - $600 = $3,400. Using the consumption function C = 400 + 0.6Yd, we substitute Yd = $3,400 to get C = 400 + 0.6(3,400) = 400 + 2,040 = $2,440. Savings is the part of disposable income not consumed, so Savings = Yd - C = $3,400 - $2,440 = $960.

The Peruvian Economy Can Be Characterized by Equation 9