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Suppose that the economy is characterized by the following behavioralequations: C = 160 + 0.6YD, I = 150, G = 150, T = 100. Solve for equilibrium...
. Suppose that the economy is characterized by the following behavioralequations: C = 160 + 0.6YD, I = 150, G = 150, T = 100.•
a. Solve for equilibrium output. Compute total demand. Is it equal toproduction? Explain.•
b. Assume that G is now equal to 110. Solve for equilibrium output.Compute total demand. Is it equal to production? Explain.•
c. AssumethatGisequalto110,so output is given by your answer to (b).Compute private plus public saving. Is the sum of private and publicsaving equal to investment? Explain.1
**Just short answer questions, do not need an essay for it.
(a) Y = C + I + GY = 160 + 0.6(Y-100) + 150 + 1500.4Y = 400Y* = 1000At equilibrium, total demand = 1000Total demand equals production because at equilibrium, total demand equalstotal supply...