If anyone could help i would be greatful
Hey
I was wondering if someone could help me do this question as its quite urgent and i dont know where to begin
A simple income model is given by
Y = C + I* + G*
C = a + bY (a > 0 and 0 < b < 1)
for some constants a and b and where I*, G* are exogenous variables.
Show that the relationship between equilibrium C and G* is linear.
Deduce the change in C if G* increases by 1 unit.
Thanks
So C= a+ b(C+ I*+ G*)= a+ bC+ bI*+ bG*
C- bC= a+ bI*+ bG*
C(1- b)= a+ bI*+ bG*
for some constants a and b and where I*, G* are exogenous variables.
Show that the relationship between equilibrium C and G* is linear.
Deduce the change in C if G* increases by 1 unit.
Thanks[/QUOTE]
To show that the relationship between C and G* is linear, what is the definition of "linear"?
What is ?