Question

In a closed economy (no imports or exports), Aggregate Expenditure 'AE' is defined as the sum of Consumption Expenditure 'C', Investment Expenditure 'I' and Government Expenditure 'G' or
AE = C + I + G
In equilibrium, Income 'Y' is equal to 'AE'.
1. If Y = $1265, C = $660, and I = $325, solve for G.

Answer 1

Answer:

G is equal to $280

Explanation:

The equation for a closed economy is:

AE= C+ I + G

Since it is stated that at equilibrium Y= AE, substitute in the equation, giving:

Y= C+ I+ G

Putting in the given figures

1265= 660+ 325+ G

1265= 985+ G

1265-985= G

$280= G

Answer 2

Answer:

$280

Explanation: