Answer: hello your question has some missing information below is the missing information
An economy is initially described by the following equations:
C = 80 + 0.8(Y – T)
I = 120 –5r
M/P = Y – 25r
G = 100
T = 100
M = 2,700
P = 3
answer :
equilibrium interest rate ( r ) = 5.6%
equilibrium level of income = 1040
Explanation:
<u>a) New equilibrium interest rate </u>
T = 100 - 20/100 ( 100 ) = 80
Y = C + I + G
= 80 + 0.8( y - 80 ) + 120 - 5r + 100
= 236 + 0.8y - 5r
y = 1180 - 25r ------ ( 1 )
M/P = Y - 25r = 2700 / 3
y = 900 + 25r ------- ( 2 )
equate; equation ( 1 ) and equation ( 2 )
1180 - 25r = 900 + 25r
∴ r = 5.6%
<u>b) Equilibrium level of Income </u>
To determine Equilibrium level of income we will use equation2
Y = 900 + 25(5.6) = 1040
