Suppose the economy includes only consumers and business (no government or inter

Question

Suppose the economy includes only consumers and business (no government or interantional trade) and that consumer saving is the only source of leakage (so y=Yd) in this private sector economy, spending behavior is represented by C=$450+0.5Y and I=$300 a. use this info to complete the following table:

b. what is the value or equilibrium output?

c. if full employment output is $2500 what kind of gap exists?

d. How large is the gap?

i understand that c=$450+.5y but i cannot figure out how to solve for y, also i need help with b c and d. If you could show work so i can understand, i would appreciate that.

income consumption + investment = desired spending 500 450+.5y 300 1000 450+.5y 300 1500 450+.5y 300 2000 450+.5y 300 2500 450+.5y 300

Explanation / Answer

when we have to evaluate equilibrium : AD=AS i.e AD=C+I AS =Y=C+S FURTHER S=I

WHEN YOU WILL COMPUTE THE OUTPUT SUBSTRACT IT WITH NEW OUTPUT YOU WILL GET THE GAP.

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