The economy of Kiwiland can be characterized by Equation 9.6.
EQUATION 9.6:
C = 1,000 + 0.5Yd
T = 200
G = 400
I = 500
-Refer to Equation 9.6. The equilibrium level of income in Kiwiland is

Question

Quizplus · Accepted Answer

The equilibrium level of income (Y) is found where planned expenditure equals income, or Y = C + I + G. Given C = 1,000 + 0.5Yd (where Yd = Y - T), T = 200, G = 400, and I = 500, we first find Yd = Y - 200. Substituting Yd in the consumption function, we get C = 1,000 + 0.5(Y - 200). The equilibrium condition becomes Y = 1,000 + 0.5(Y - 200) + 500 + 400. Solving for Y, we find Y = 3,600.

The Economy of Kiwiland Can Be Characterized by Equation 9