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Homework answers / question archive / This is an example of a two-point question

This is an example of a two-point question

Economics

This is an example of a two-point question.

Consider this simplified model of an open economy with government

C = 50 + .75 YD

I = 70

G = 80

T = 40 + .2 Y

X = 60

IM = .15 Y

Calculate equilibrium income rounded to one decimal place

Your Answer: ________

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At equilibrium , 

Y = C + I + G + X - IM

 

Y = 50 + 0.75(Y-40+0.2Y) + 70 + 80 + 60 - 0.15Y

Y = 50 + 0.75Y - 30 + 0.15Y + 70 + 80 + 60 - 0.15Y

Y = 230 + 0.75Y + 0.15 Y - 0.15Y

Y = 230 + 0.90Y

Y - 0.90Y = 230 

0.10Y = 230

Y = 230/0.10

Y = 2,300

So, the equilibrium level of Y is 2,300.

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