Score: 0 of 1 pt 17 of 34 (3 complete) HW Score: 7.35%, 2.5 of 34 p Text Problem

Question

Score: 0 of 1 pt 17 of 34 (3 complete) HW Score: 7.35%, 2.5 of 34 p Text Problem 8ab Question Help This problem examines the implications of allowing investment to depend on output Suppose the economy is characterized by the following behavioral equations: I-bo + bY Government spending and taxes are constant. Note that investment increases with output Co is autonomous consumption, cy is the propensity to consume, and bo is business confidence. Solve for equilibrium output. y- (Property format your expression using the tools in the patette Hover over tools to see keyboard shorteuts Eg. subscript can be created with the character.) ns Enter your answer in the answer box and then click Check Answer Clear A 3 parts remaininn a.edu

Explanation / Answer

we know that

Y= C + I +G

Y= C0 + C1( Y- T) + G0 + b0 + b1Y

Y= C0 + C1 Y- C1T + G0 + b0 + b1Y

( 1- C1 -b1)Y = C0 - C1T + G0 + b0

Y= 1/( 1- C1 -b1) [C0 - C1T + G0 + b0]

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