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Information for an economy without government spending

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1. Suppose you are given the following information for an economy without government spending, exports, or imports. C is desired consumption, I is desired investment, and Y is income. C and I are given by:

C = 1300 + 0.85Y

I = 450

B. Applying the equilibrium condition that Y = AE, determine the level of equilibrium national income.

Y = AE

Y = 1750 + 0.85Y

Y - 0.85 = 1750

Y = 1750 / 0.15

Y = 11,666.67 The equilibrium national income is $11,666.67

C.  Using your answer from part (b), determine the values of consumption, saving, and investment when the economy is in equilibrium.

Reference no: EM132476863

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