FindingEquilibriumIncome

FindingEquilibriumIncome - Finding Equilibrium Income (Y*)...

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===================================== (Formula for the 45 degree-line) (Formula for Expenditures) Finding Equilibrium Income (Y*) Using the Income-Expenditures Approach Stage I: Consumption C = 100 + .61Y Y=AE AE = 100 + .67Y Y= 100 + .67 Y .33Y=100 Y* = 300 Stage II: Investment 1=200 Y = AE (Formula for the 45 degree-line) AE = 100 + .67Y + 200 (Formula for Expenditures) Y= 300 + .67 Y .33 Y= 300 Y*= 900 Stage III: Government Spending G=300 Y = AE (Formula for the 45 degree-line) AE = 100 + .67Y + 200 + 300 Y= 600 + .67Y .33 Y= 600 Y*= 1,800 Stage IV: Taxes T = 300 NOTE: C = 100 + .67(Y - T) Y = AE (Formula for the 45 degree-line) AE = 100 + .67 (Y - 300) + 200 + 300 Y = 600 + .67 (Y - 300) Y = 600 + .67Y - 200 .33Y= 400 Y*= 1,600 Stage V: Net Exports (X-M) = 400 Y = AE (Fonmula for the 45 degree-line) AE = 100 + .67 (Y - 300) + 200 + 300 + 400 Y = 1,000 + .67 (Y - 300) Y = 1,000 + .67Y - 200 .33Y= 800 Y* = 2,400 MULTIPLIERS For Government Spending: IiY= __ 1 IiG (1-MPC) IiY = IiG * __ 1
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