Urgent Help with 2003 HSC ques (1 Viewer)

[mz_purfect]

heya can ne1 plz help me wif dis 2003 mc ques

8. What is the equilibrium level of income if C = 100 + 0.8Y and I = 40?
(A) 100
(B) 140
(C) 500
(D) 700

well de ansa is D...
but i really don't get this question so can sum1 plz explain it to me in detail...it would b very much appreciated....fanks in advance

If we all practice an eye for an eye and a tooth for a tooth, soon the whole world shall be blind and toothless.

 

[Demandred]

C = Y+S or C = income + savings

In this case, C = 100 + 0.8 Y (income) + 40 (savings)

The reason savings is 40 is because savings = investment, since I = 40, S = 40 as well. *edit

Whatever you substitute in as income must also be substituted into C, as it is at equilibrium, meaning LHS = RHS of the equation.

So if you put 700 in...

700 = 100 + (0.8 x 700) + 40

It balances, as it is in equilibrium.


I'm quite sure that should be right.

 

[jky.]

lols.
well this is how i tackle these questions..

well, we know that C = 100 + 0.8Y and I = 40

the economy is in equalibrium when S = I ( or AD = AS )

S is basically opposite C (haha, this is how i remmeber it)

so,

S = -100 + 0.2Y (0.2 since, MPS + MPC = 1)

let S = I
-100 + 0.2Y = 40
0.2Y = 140
Y = 140 divide 0.2
which then equals 700.

 

[mz_purfect]

ahhhh....NOW i get it....finally!
phew...
thanx jkl and demandred it has really helped!
take care

If we all practice an eye for an eye and a tooth for a tooth, soon the whole world shall be blind and toothless.