Calculate the equilibrium level of national income (Y) where Y = C + I + G; C = 100 + 0.75Y; I = 50; G = 200
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Correct Answer: Option D
Explanation:
y = \(\frac{a + i + G}{1 - b}\)
where b = 0.75
= \(\frac{100 + 50 + 200}{1 - 075}\)
= \(\frac{350}{0.25}\)
= 1400
Alternatively:
Y = C + I + G
Y = 100 + 0.75Y + 50 + 200
Y - 0.75Y = 350
Y( 1 - 0.75) = 350
= \(\frac{350}{0.25}\)
Y = 1400
y = \(\frac{a + i + G}{1 - b}\)
where b = 0.75
= \(\frac{100 + 50 + 200}{1 - 075}\)
= \(\frac{350}{0.25}\)
= 1400
Alternatively:
Y = C + I + G
Y = 100 + 0.75Y + 50 + 200
Y - 0.75Y = 350
Y( 1 - 0.75) = 350
= \(\frac{350}{0.25}\)
Y = 1400