Equilibrium

Question

How to find the equilibrium level of national income(Y)in the basic microeconomic model

 

Y=C+I   where C=40+0.5Y and I = 200

Answer 1

Hello Ken, thank you for posting your question!

To solve this one you can just substitute in the given equations for C and I back into the original equation

Y = C + I  is the general framework and then you can substitute in C = 40 + 0.5Y and I = 200 and solve for the value of Y algebraically

Y = 40 + 0.5Y + 200

0.5Y = 240

Y = 480

The equilibrium level of national income here would be 480