Consumption, investment, and government spending and tax revenues are given by the following information: C = 100 + 0.5Yd G = 100 T = 50 I = 100 What is saving in the US economy at the equilibrium level of output in the US economy? (Make sure you show all calculations!)

Question

Love

Business

23 September, 12:46

Consumption, investment, and government spending and tax revenues are given by the following information: C = 100 + 0.5Yd G = 100 T = 50 I = 100 What is saving in the US economy at the equilibrium level of output in the US economy? (Make sure you show all calculations!)

+2

Answers (1)

Know the Answer?

Madeline Gray · Answer 1

Savings = Y-C

But Y = C + I + G

C = G + byd; 100 + 0.5yd

Yd = Y-T

T = 50

I = 100

G = 100

Y = 100 + 0.5 (y-50) + 100 + 100

Y = 100 + 0.5y - 25 + 200

Y = 300 - 25 + 0.5y

Y-0.5y = 275

Y (1-0.5) = 275

Y (0.5) = 275

Y = 275/0.5

Y = 550

But Y = C + S

So, S = Y - C

Y - C = 550 - (100+0.5yd) = S

Y - C = 550 - (100+0.5 (Y-50) = S

Y - C = 550 - (100+0.5y-25) = S

Y - C = 550 - (100+0.5y - 25) = S

Since Y = 550

Y-C = 550 - (100+0.5 (550) - 25) = S

Y-C = 550 - (100 + 275 - 25) = S

Y - C = 550 - 100-275+25 = S

Y-C = 550 - 350 = S

Y - C = 200 = S

Y-C = Savings = S = 200

Therefore, savings at the equilibrium level of output is 200