Question

Suppose that autonomous consumption is 1 comma 500​, government purchases are 1 comma 500​, planned investment spending is 1 comma 500​, net exports are negative 500​, and the MPC is 0.6. Equilibrium GDP is equal to ​$ nothing. ​(Enter your response as an​ integer.)

Answer 1

Answer: $2500 ⇒ Equilibrium GDP

Step-by-step explanation:

Given that,

autonomous consumption (
`\bar{C}` )= 500

government purchases(G) = 500

planned investment spending (I) = 500

Net Exports (NX) = (-500)

Y = GDP

MPC (c) = 0.6

Consumption (C) =
`\bar{C}` + cY

= 500 + 0.6Y

Y = AD

Y = C + G + I + NX

Y = 500 + 0.6Y + 500 + 500 + (-500)

0.4Y = 1000

Y =
`(1000)/(0.4)`

Y = $2500 ⇒ Equilibrium GDP