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Calculative Question
Economy X would like to use a certain combination of capital and labor with the demand variables to determine the quantity output. Based on the below information
Aggregate Demand Aggregate Supply Equilibrium
YAD = C + I + G YAS = A Kα L1-α YR = 0.5YAD + 0.5YASC = 300 + βYD A = (1 + g) AoYD = YR + TR - tYR K = 32.86TR = 40 L = 154.3G = 130 g = 7.5%I = 100 Ao = 100t = 0.1 α = 0.25
Where C is private consumption, YD is disposable income; TR, G and I are transfer payments, government spending and total investment, respectively. A in the index of technology and K and L are capital and labour inputs. A0 is the initial levels of A and L, both assumed to be 100, while g is the growth rates. The MPC is 0.60 All figures are in $m except for t, g, α and MPC values which are decimals.
Calculate the equilibrium level of income (YR) for Economy X.
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