Question

Assume taxes are zero and the consumption function is C = 0. 80(Yd) + $300 and Investment is I = $200. Based on this information, the (short-run) equilibrium level of GDP (income) is $

Answer 1

Answer: Your welcome!

Step-by-step explanation:

The short-run equilibrium level of GDP (income) is $1000. This is calculated using the equation Y = C + I, where Y is GDP (income), C is consumption, and I is investment. Since consumption is C = 0.80(Yd) + $300, and Investment is I = $200, the equation can be re-arranged to Y = 0.80Yd + $500, which solves for Y = $1000. This is the equilibrium level of GDP (income).