Question

An economy is described by the following set of equations: C = 1000 + 0.9(Y-T) I = 2000 G = 1500 Exports = 1000 Imports = 1200 T = 1500 Potential GDP= 31,000

What is the short-run Equilibrium?

Answer 1

The short-run equilibrium output in this economy is $10,000.

Step-by-step explanation:

The short-run equilibrium is the level of output where aggregate expenditure (AE) is equal to potential GDP. In this case, AE is calculated by summing up consumption (C), investment (I), government spending (G), exports (X), and subtracting imports (M) from aggregate income (Y). By substituting the given values into the equations, we find that the short-run equilibrium output is $10,000.