Final answer:
The student's question involves algebra and economics to solve an equation for 'Y' which represents national income or GDP in a simplified economic model. The given tax rates are substituted and the equation simplified to determine how GDP is affected by economic events and policies.
Step-by-step explanation:
The calculation provided involves algebraic manipulation to solve for the variable Y, representing national income or GDP in a simplified economic model. By substituting tax rates and simplifying the equation, we arrive at an equation with only one variable. This is a common technique in economics to create models that can predict the impact of economic events and policy actions on real GDP.
Here's a step-by-step breakdown of the given equation:
- Begin with the original equation Y = 140 + 0.9(Y− T) + 400 + 800 + 600 – 0.15Y
- Insert the tax rate T as 0.3Y to eliminate the variable T and simplify the equation to Y = 140 + 0.9Y - 0.27Y + 1800 - 0.15Y
- Further simplify the equation to find that Y = 1940 / 0.52
- Solve it to conclude that Y = 3730
This algebraic framework is useful in economics to forecast how different variables, such as taxes and spending, influence overall economic output. The example provided also demonstrates the effect of taxes on disposable income and ultimately on GDP.