Suppose a closed economy has an intended investment of 200 and an aggregate consumptionfunction given by C = 200 + 0.50Yd. Suppose also that the government spends 50 but collects%3Dno taxes.What is equilibrium output and income?(round your answer to the nearest whole value)

Answered: Suppose a closed economy has an…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Suppose a closed economy has an intended investment of 200 and an aggregate consumption
function given by C = 200 + 0.50Yd. Suppose also that the government spends 50 but collects
%3D
no taxes.
What is equilibrium output and income?
(round your answer to the nearest whole value)

Expert Solution

Step 1

The equilibrium level of output and income is the point where the aggregate expenditure is equal to the real output of the country. The equilibrium condition in the closed economy is:

$Y = A E Y = C + I + G$

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