Hw score: 43.83 % 1 1 ,83 or 27 pts 40127 (14 complete) ? , Score: 0 of 1 pt Que

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Hw score: 43.83 % 1 1 ,83 or 27 pts 40127 (14 complete) ? , Score: 0 of 1 pt Question Help Text Problem 1.3b Assume that in 2015, the following prevails in the Republic of Nurd: Government spending (G)-$0 Net taxes (T) $0 Planned investment(1)-$25 Assume that households in Nurd consume 80 percent of their income, they save 20 percent of their income. Thus, the consumption function and saving function of Nurd are: c-o80Yd and S-0.20%, where disposable income Y.-Y-T Determine the equilibrium level of income. Equilibrium income = S? (Enter your response as an integer) Enter your answer in the answer box and then click Check Answer

Explanation / Answer

C=.8Yd=0.8Y because tax=0

Planned investment=25

For equilibrium level of GDP we know AD=AS=Y

Thus Y=0.8Y+25

0.2Y=25

Y=25/0.2=125

Equilibrium level of GDP=$125

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