Question

Given the equations for c, i, g, and nx below, what is the equilibrium level of gdp? c = 1,000 + 0.8y i = 1,500 g=1,250 nx = 100

Answer 1

equilibrium level of gdp is 19,250.

E= C + I + G + NX
E = Y
Y = (1,000 + 0.8y) + 1,500 + 1,250 + 100
Y = 0.8y + 3850
Y-0.8y = 0.8y-0.8y + 3850
0.2y = 3850
Y = 3850/0.2
Y = 19,250

Answer 2

Based on the components of GDP, the equilibrium level of GDP here will be $19,250.

What is the equilibrium level of GDP?

GDP using the expenditure method can be found as:

Y = Consumption (C) + Investment (I) + Government spending (G) + Net exports (NX)

Solving gives:

Y = 1,000 + 0.8y + 1,500 + 1,250 + 100

Y - 0.8Y = 3,850

0.2Y = 3,850 / 0.2

Y = 3,850 / 0.2

= $19,250

In conclusion, the equilibrium level of GDP is $19,250.

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