Suppose the consumption function is C=150+0.5*Y, where C is consumption and Y is real GDP (both are in billions of $). Assuming that I=$100 billion, G=$150 billion, and NX=-$50 billion, how much is equilibrium real GDP in this economy?

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- December 9th 2009, 09:45 PMjebckrConsumption functionSuppose the consumption function is C=150+0.5*Y, where C is consumption and Y is real GDP (both are in billions of $). Assuming that I=$100 billion, G=$150 billion, and NX=-$50 billion, how much is equilibrium real GDP in this economy?

- December 9th 2009, 10:17 PMmrfloyd
Does the formula Y = C + I + G + NX ring a bell?

You have C = 150 + 0.5*Y. Substitute the function into the top equation and solve for Y. - December 9th 2009, 10:21 PMjebckr
It's odd how I make things so much harder than they need to be. Thanks for "ringing my bell".