MC question. (1 Viewer)

[krnofdrg]

What is the equilibrium level of income C= 100+0.8Y and I=40

A 100

b 140

c 500

d 700..

Answer is D..

Can anyone explain how to do this to me?? ty~

 

[determine]

What is the equilibrium level of income C= 100+0.8Y and I=40

A 100

b 140

c 500

d 700..

Answer is D..

Can anyone explain how to do this to me?? ty~

okay, so basically in a two-sector economy, income = consumption + investment, i.e. Y = C + I. it's basically a shortened version of the five-sector economy model of Y = C + I + G + (X-M), except in this case, there's no exports/imports (i.e. no trade) and no government expenditure.

so what you do for this question, is use the equation Y = C + I and then substitute in the values:

Y = C + I
Y = (100 + 0.8Y) + 40
Y = 140 + 0.8Y

Then, solving like a typical equation, take the 0.8Y over to the left-hand side.

0.2Y = 140
Y = 140 x 5
Y = 700

And that's your answer! hope that helps!

 

[krnofdrg]

okay, so basically in a two-sector economy, income = consumption + investment, i.e. Y = C + I. it's basically a shortened version of the five-sector economy model of Y = C + I + G + (X-M), except in this case, there's no exports/imports (i.e. no trade) and no government expenditure.

so what you do for this question, is use the equation Y = C + I and then substitute in the values:

Y = C + I
Y = (100 + 0.8Y) + 40
Y = 140 + 0.8Y

Then, solving like a typical equation, take the 0.8Y over to the left-hand side.

0.2Y = 140
Y = 140 x 5
Y = 700

And that's your answer! hope that helps!

THANKS ALOT DUDE!! no wonder you were state rank XD..

 

[determine]

THANKS ALOT DUDE!! no wonder you were state rank XD..

hahaha! not a problem! I'm actually selling my notes for Economics and my other top-scoring subjects, check out http://community.boredofstudies.org/showthread.php?t=266313 if you're interested!! don't miss the opportunity!