Question

In the simple, two-sector model, if C=120 billion +.75(Y) and I = 30 billion, then break-even disposable income is equal to?

Answer 1

What is \(I\) supposed to be?

Answer 2

Private sector Investments.

Answer 3

So this is macroeconomics?

Answer 4

Yes.

Answer 5

The thing is, I know you have to add the Investments to the autonomous consumption (120 billion) if you are trying to solve for equilibrium, but im not sure if I have to add the Investments when solving for break even

Answer 6

What formula are you aware of so far?

Answer 7

What principle or rule regarding C, I, and income are you aware of?

Answer 8

For equilibrium the formula is supposed to be TE (total expenditures) = Yd (disposible income), for break even I wrote down C = Yd, but I only did examples of break-even when Investments weren't mentioned, I don't know if I'm supposed to include investments in the formula if mentioned

Answer 9

To be honest it has been a while, but I think investment is treated an expenditure.

Answer 10

It's money spend on investments. (not money earned through investments)

Answer 11

I think I figured it out, you don't consider investments when solving for break-even, you just take C and Yd into account.

Answer 12

Thanks anyways!

Answer 13

Oh cool

Answer 14

equilibrium is the same in economics and in regular math
you are looking for the intersection of two lines. one for aggregate supply and the other is aggregate demand

Answer 15

the same idea is in Keynesian economics for investments
However, a few terms are included
Investment = I = Y - C
that is the expenditure on goods and services not meant for consumption
Y is income
C is consumption

Answer 16

http://macrotutor.weebly.com/1-aggregate-demand.html