From the Keynesians, Y = C + I + G + NX can be transformed into a theoretical mo

Question

From the Keynesians, Y = C + I + G + NX can be transformed into a theoretical model. In particular, assume that the consumption C = A + mpc (Y-T), where A is a constant, mpc is the marginal propensity to consume, Y is national income and T is income taxes. Suppose in the goods market equilibrium, aggregate expenditure = national income such that the two Y's will be the same from Y = A + mpc (Y-T) + I + G+ NX. . Suppose C = 400 + 0.75(Y – T). G = 100, I = 100, T = 100, and NX = 100, what is the Y in the goods market equilibrium? (All of the variables are in terms of million dollars)




$ million
Please enter a whole number, with no decimal point.

Explanation / Answer

Here, we are simply asked to calculate Y. Y = C + I + G+ NX C = 400 + 0.75(Y – T) G = 100, I = 100, T = 100, and NX = 100 Plug in the values: Y = C + I + G+ NX Y = C + I + G+ NX Y = 400 + 0.75(Y – T) + 100 + 100 + 100 Y = 400 + 0.75(Y – 100) + 100 + 100 + 100 Now, solve for Y. Y = 400 + 0.75(Y – 100) + 100 + 100 + 100 Y = 700 + 0.75*Y – 75 Y(1-0.75) = 625 Y = 625/(1-0.75) Y = 2500

Related Questions

Navigate

• Browse (All)
• Browse F
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.