multiple choice from 2003 HSC (1 Viewer)

[motlai]

I'm having trouble with this question from the 2003 HSC:

What is the equilibrium level of income if C=100+0.8Y and I=40?

a) 100
b) 140
c) 500
d) 700

Any help would be greatly appreciated

thanks

 

[Jago]

Y = C + I
= 100 + .8y + 40
.2y = 140
y = 140 x 5
= 700, (d)

 

[motlai]

thanks for that, jago, you know your stuff!

where did you get that formula from?
I remember that C=a+cY formula having something to do with the MPC, but I don't remember seeing it elsewhere

 

[Jago]

Y = C + I + G + X - M

it's in the syllabus

I think what you're referring to is the consumption function(factor? i forget), with that you can find the MPC and hence the multiplier.

 

[motlai]

oh, that formula... i guess i was thrown coz the G and (X-M) part wasn't in it

thanks very much for your help!

 

[Haku]

nono, its not that formula is a whole different theory altogether.

if you got the Riley book, the non leading edge one...forget name, have it but dun use it. anywayz its in there. but i doubt it would be in the hsc as its not part of the sylabus, teacher said they put in the 2003paper was wrong and i dun think that question was actually counted, or taken out,

 

[underthebridge]

its simply the equilibrium formula for the three sector model of the economy Y = C + I and in equilibrium Y = C + S

 

[Jago]

Your Answer 	D
Correct Answer (as highlighted below) 	D

What is the equilibrium level of income if C = 100 + 0.8Y and I = 40?
A 	100
B 	140
C 	500
D 	700

From BoS - the official one