Assume: c = 40 + 0.8(y - t) g = 10 i = 20 t = 0, where t are taxes. (a) calculate y at equilibrium. (b) calculate c, i, and g at
equilibrium. (c) now assume, ex = 5 + 4ep/p im = 10 + 0.1 (y - t) - 3ep/p e = 3 p = 1.5 p = 2
1 answer:
(a). To calculate Y at equilibrium
Y = C + I + G
Y = 40 + 0.8(Y – 0 + 10 + 20)
Y = 350
(b). To calculate C, I and G at Equilibrium
C = 40 + 0.8 Y
Since Y = 350
C = 40 + 0.8(350)
C = 40 + 280
C = 320
I = 20
G = 10
(c).To find
equilibrium Y
Given,
EX = 4 + 3EP/P
IM = 8 + 0.1 (Y - T) - 2EP/P
E = 3
P = 1
P = 1.5
Y = 170
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