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ECON 204 _ Presentation 1

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TUTORIAL 1- WEEK 3 Question 1: Suppose that the economy is characterized by the following behavioural equations: C = 160 + 0.6 Y D I = 210 G = 150 T = 100 + 0.1 Y Solve for : a. Equilibrium GDP (Y) ã The equilibrium condition is Y = C(Y−T)+I+G ã Hence, Y = 160+0.6*(Y–100–0.1Y)+210+150 Y = 520+0.6Y–60–0.06Y 0.46Y = 460  Y = 1000 Equilibrium GDP 1000 b. Disposable Income (Y D ) ã Y D = Y - T =1000 - (100 + 0.1 * 1000) =800 c. Consumption Spending (
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  TUTORIAL 1- WEEK 3 Question 1: Suppose that the economy is characterized by the following behavioural equations: C = 160 + 0.6 Y D I = 210 G = 150 T = 100 + 0.1 Y Solve for :  a. Equilibrium GDP (Y) ã The equilibrium condition is Y = C  ( Y  − T  )+ I  + G   ã Hence, Y = 160+0.6*(Y  – 100  – 0.1Y)+210+150 Y = 520+0.6Y  – 60  – 0.06Y 0.46Y = 460   Y = 1000  Equilibrium GDP 1000  b. Disposable Income (Y D ) ã Y D  = Y - T =1000 - (100 + 0.1 * 1000) =800  c. Consumption Spending (C) Y D  = 800 C = 160 + 0.6 Y D  C = 160 + 0.6 (800) = 640
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