Recall the Samuelson Model that represents the relationships between the national income, Yt ; consumption: Ct; investment It and government spending, G0.
In addition, current consumption depends on last period incorne; while, the investment depends on the changes of consumptions. Government spending, on the other hand, is treated as an exogenous variable. Then, the model is represented as :
Yt = Ct + It + G0 ; Ct = 0.90 Yt-1 ; It = 0,20 (Ct - Ct-1)
By using a method of Second Order Difference Equation, find the solution of national income (Y)!