Solution-Equilibrium level of income in the economy

Equilibrium level of income in the economy

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Reference no: EM132323754

Consider the macroeconomic model:

Y=C+I

C=a+b√Y

Here: Y is national income, I is fixed investment that does not depend uponCorY,anda>0andb>0areparameters. Cstandsfortotal consumption by all agents in the economy and, as can be seen from the second equation above, depends upon the level of national income.

Solve for Y . This is called the equilibrium level of income in the economy.

(Hint: It might help if you define Z= √Y so that Z^2 =Y. You should end up with a quadratic equation to solve.)

Reference no: EM132323754

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Equilibrium level of income in the economy

Reference no: EM132323754

Reference no: EM132323754

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