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Given C=550 +0.75Y, I=110 - 475i, G=40, X=35, M=10, T=40, and interest rate is at 4%....

Given C=550 +0.75Y, I=110 - 475i, G=40, X=35, M=10, T=40, and interest rate is at 4%. Draw AE-Y model and identify the equilibrium point. what is the level of equilibrium GDP?

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Answer #1
Y C I G NX AE
2200 2170 91 40 25 2326
2300 2245 91 40 25 2401
2400 2320 91 40 25 2476
2500 2395 91 40 25 2551
2600 2470 91 40 25 2626
2700 2545 91 40 25 2701
2800 2620 91 40 25 2776
2900 2695 91 40 25 2851

I = 110 - 475 x 4% = 91

NX = X - M = 25

C = 550 + 0.75 x (Y - T) = 520 + 0.75Y (Consumption is a function of disposable income Yd = Y - T)

C + I + G + NX = Y for equilibrium

Solving the above equation: Y = 2704 (equilibrium GDP)

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