Use the information below to answer the following questions.
Fact 27.5.2
The economy of Tinseltown has a consumption function of C = 15 + 0.7Y , investment equal to 8, government expenditure equal to 12, exports equal to 20, and an import function of M = 0.2Y.
-Refer to Fact 27.5.2. What is equilibrium real GDP for this economy?
A)110
B)55
C)27.5
D)70
E)550

Question

Quizplus · Accepted Answer

Equilibrium real GDP is found by solving the equation Y = C + I + G + (X - M) for Y. Substituting the given values, we get:Y = 15 + 0.7Y + 8 + 12 + (20 - 0.2Y)0.3Y = 55Y = 55 / 0.3 = 110

Use the Information Below to Answer the Following Questions