eco403 assignment no 2 idea solution april spring 20111

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[size=12]full solution are in attachment[/SIZE]


ECO403 Assignment#2 Idea solution


A):
Let an economy is characterized by the following equations:
C = 400 + 0.8(Y-T)
G = 300
T = 250
I = 200
CALCULATE the equilibrium level of output.
Answer a
Y=C+I+G
Y=400+0.8(y-T)+200+300
Y=400+0.8(?-250)+200+300
Y=400+200+300=900
(0.8y=?-T)=900
Y=900={(0.8y-250)}
Solving y=?
Y=(1-0.8=0.2)=900
Y=900/0.2=4500
Deduct tax=250