Hi everyone,
i am just looking at a question from Bulmer Updated Economics Part C textbook (2009) and there is a question I can do but do not understand.
15) If C= 2000+0.8Y and investment is steady at 1000, then equilibrium level of national income would be:
Well this is what I do first of all:
autonomous spending is $2000 and the MPC is 80% if the extra dollar one receives. Now if i replace the "C=" with a "Y=" I understand that the Y=C+I so i add the extra 1000 for investment, subtract 0.8Y with LHS 1Y to get 0.2Y=3000. Here on in the answer is $15000
I get it that way, but to make matters more difficult there is the good ol' AD/AS graph BUT one curve is C+s (the 45º one) and the other is a C+I curve (that i usually see as AD). I just dont get this:
what do those two curves mean and why is it C=2000+.8Y instead of Y=....
Hope this makes sense
thanks for your help everyone, will never forget it
i am just looking at a question from Bulmer Updated Economics Part C textbook (2009) and there is a question I can do but do not understand.
15) If C= 2000+0.8Y and investment is steady at 1000, then equilibrium level of national income would be:
Well this is what I do first of all:
autonomous spending is $2000 and the MPC is 80% if the extra dollar one receives. Now if i replace the "C=" with a "Y=" I understand that the Y=C+I so i add the extra 1000 for investment, subtract 0.8Y with LHS 1Y to get 0.2Y=3000. Here on in the answer is $15000
I get it that way, but to make matters more difficult there is the good ol' AD/AS graph BUT one curve is C+s (the 45º one) and the other is a C+I curve (that i usually see as AD). I just dont get this:
what do those two curves mean and why is it C=2000+.8Y instead of Y=....
Hope this makes sense
thanks for your help everyone, will never forget it