Homework Answers
Answer
The correct answer is 4980.
AD is the sum of four components Consumption, Investment,
Government expenditure, and net exports.
AD=C+I+G+NX
here
NX=0
AD=C+I+G
AD=120+0.90Yd+160+170
Yd=Y-T
Yd is the disposable income
Yd=120+0.90(Y-T)
Yd=120+0.90(Y-80)
Yd=120+0.90Y-72
Yd=48+0.90Y
AD=Y
Y=120+0.90Y+160+170+48
Y-0.90Y=498
0.1Y=498
Y=4980
Thus, the equilibrium GDP is 4980
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