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In the Keynesian-cross analysis, if the consumption function is given by C = 20 + 0.7 (Y – T), and planned investment is 100, G is 100, and T is 100, then equilibrium Y is:

Respuesta :

Answer: 500

Explanation:

At equilibrium, it should be noted that,

Y = C + I + G

where ,

C = Consumption = 20 + 0.7(Y - T)

I = Investment = 100

G = Government expenditure = 100

Y = C + I + G

Y = 20 + 0.7(Y - 100) + 100 + 100

Y = 20 + 0.7Y - 70 + 200

Y - 0.7Y = 150

0.3Y = 150

Y = 150/0.3

Y = 500