Consider a simple model like the one developed in this chapter. The following eq

Question

Consider a simple model like the one developed in this chapter. The following equations show the levels of desired consumption and investment. C = 200 + 0.8Y I = 100 where C is the desired consumption, I is the desired investment and Y is income. Complete the table to the right. (Round your responses to the nearest dollar.) What is the equilibrium level of national income in this model? The equilibrium level of national income for this model is $. (Round your response to the nearest dollar.) Equilibrium occurs at the level of national income where actual aggregate expenditure equals actual national income. desired aggregate expenditure equals desired national income. desired aggregate expenditure equals actual national income. actual aggregate expenditure equals desired national income. The desired level of savings at the equilibrium level of national income is $. (Round your response to the nearest dollar.)

Explanation / Answer

C=200+0.8Y

I=100

AE= C+I

3300

b.

At equilibrium, Y=AE

Y=C+I

Y=200+0.8Y+100

0.2Y=300

Y=$1500 is the equilibrium level of national income

Equilibrium occurs when B) desired aggregate expenditure equals desired national income

Savings=Y-C

=Y- (200+0.8Y)

=0.2Y-200

=0.2*1500-200

S=100

Desired level of savings at the equilibrium level of national income is $100

Y C I AE 0 200 100 300 750 800 100 900 1500 1400 100 1500 2250 2000 100 2100 3000 2600 100 2700 3750 3200 100

3300

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