Problem 1 Suppose the system of aggregate expenditures can be described by the following relationships and parameter values. C(Y – T) = 1200 + 0.8(Y – T') I(r) = 100 – 3r G = 200 ;T = 200; r = 5; Ex = Im = 0 %3D 1. In the consumption function, 1200 represents the portion of consumption that is not dependent on disposable income. Suppose something causes households to become concerned about their economic futures and this autonomous consumption falls to 1100. Find the new equilibrium level of Y (output/income).

Problem 1 Suppose the system of aggregate expenditures can be described by the following relationships and parameter values. C(Y – T) = 1200 + 0.8(Y – T') I(r) = 100 – 3r G = 200 ;T = 200; r = 5; Ex = Im = 0 %3D 1. In the consumption function, 1200 represents the portion of consumption that is not dependent on disposable income. Suppose something causes households to become concerned about their economic futures and this autonomous consumption falls to 1100. Find the new equilibrium level of Y (output/income).

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Problem 1 Suppose the system of aggregate expenditures can be described by the following relationships and parameter values. C(Y – T) = 1200 + 0.8 (Y – T) I(r) = 100 – 3r G = 200 ;T = 200; r = 5; Ex = Im = 0 %3D 1. Find the equilibrium value ofY (output/income) in this model. Let this level of production be the economy's potential GDP (Y;).
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1a) and b)
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