Question

6a. Assume a closed economy with no government, in which the aggregate consumption function is C = 100 + .75Y and investment (I) is $100 billion. In the income-expenditure analysis, the equilibrium level of national income is:

a. $300 billion.

b. $500 billion.

c. $200 billion.

d. $800 billion.

e. $650 billion.

6b. The difference between a household’s disposable income and its consumption:

a. equals any saving by the household.

b. equals the taxes the household pays.

c. equals the taxes the household pays plus its savings.

d. equals the amount the household spends on imports.

e. none of the above

Answer 1

Q6a
answer
equilibrium is at
Y=C+I

Y=100+0.75Y+100
0.25Y=200
Y=800 billion
the national income is 800 billion
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Q6b
ANswer
Option c
c. equals the taxes the household pays plus its savings.

The saving plus taxes is the difference between disposable income and consumption