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Homework answers / question archive / Consider a simple economy in which whole investment is constant and equal to $50 billion

Consider a simple economy in which whole investment is constant and equal to $50 billion

Economics

Consider a simple economy in which whole investment is constant and equal to $50

billion. There are no government or foreign sectors, and the price level is constant. Assume that consumption behavior can be described as C = $40 billion + .8Y.

 

What is the equilibrium level of GDP in this model? Verify your answer by showing that savings equals investment in equilibrium (include a graph with your explanation please)

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