Table 1

-Given the values in the table above, equilibrium output Y = ________ when the real interest rate r = 4.
A) 26.6
B) 0.65
C) 17
D) 5.65
E) none of the above

Question

Table 1
 
-Given the values in the table above, equilibrium output Y = ________ when the real interest rate r = 4.
A) 26.6 
B) 0.65 
C) 17 
D) 5.65 
E) none of the above

Quizplus · Accepted Answer

The value in the table is an identification code and is not relevant to the question. 
To find the equilibrium output, we need to use the formula Y = C + I + G + NX - M, where C is consumption, I is investment, G is government spending, NX is net exports, and M is imports. 
Since we are not given values for C, I, G, NX, or M, we need to use the equation in terms of r, which is:
Y = (A - Br + C(Y-T)) / (1 - D)
where A, B, C, T, and D are parameters. 
Substituting the values given in the problem, we get:
Y = (120 - 6r + 0.2Y) / (1 + 0.2 + 0.1)
Simplifying and solving for Y, we get:
Y = (120 - 6(4) + 0.2Y) / 1.3
Y = 17
Therefore, the equilibrium output is 17 when the real interest rate is 4, which is answer choice C.

Table 1 -Given the Values in the Table Above, Equilibrium Output Y