(Advanced analysis) The given equations describe consumption and investment (in billions of dollars) for a private closed economy.
C = 60 + 0.6Y
I = I0 = 30
In equilibrium, the level of consumption spending will be
A) 170.
B) 270.
C) 160.
D) 195.

Question

Quizplus · Accepted Answer

In equilibrium for a private closed economy, total spending (Y) equals consumption (C) plus investment (I). Given C = 60 + 0.6Y and I = 30, we set Y = C + I. Substituting the given values, we get Y = 60 + 0.6Y + 30. Solving for Y, we find Y = 225. Substituting Y back into the consumption function, C = 60 + 0.6(225) = 195.

(Advanced Analysis) the Given Equations Describe Consumption and Investment (In