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The following equations refer to the goods market of an economy in billions of euros: C = 480 + 0
The following equations refer to the goods market of an economy in billions of euros: C = 480 + 0.6Ya I = 130 T = 80 G = 200
What is consumption at equilibrium? 0 o b.:50 o .:575
Expert Solution
Goods Market Equilibrium is
Y = C + I + G
C = 480 + 0.6 YD
C = 480 + 0.6 (Y - T)
C = 480 + 0.6 (Y - 80)
C = 480 + 0.6 Y - 48
C = 432 + 0.6 Y
Y = 432 + 0.6 Y + 130 + 200
Y = 0.6 Y + 762
Y-0.6 Y = 762
0.4 Y = 762
Y = 762/0.4 = 1,905
Equilibrium Disposable Income (YD):
Equilibrium Disposable Income (YD) = Y - T
= 1,905 - 80
Equilibrium Disposable Income (YD) = 1,825
Consumption at Equilibrium (C):
Consumption at Equilibrium (C) = 480 + 0.6 YD
C = 480 + 0.6 * 1,825
C = 480 + 1,095
C = 1,575
So, Consumption at Equilibrium (C) is $1,575
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