Economics Question (1 Viewer)

[michaeljennings]

What is the equilibrium level of income if C=150 +0.8Y and I = 50?


Can someone explain to me how to do this question

 

[d3st1nyLiang]

income-expenditure model where Y = C + I
Y = 150 + 0.8Y + 50
Y = 1000

 

[michaeljennings]

ah makes sense now. Also there was a multiple choice question that had a graph showing a shift in aggregate demand to the left and it asked which of the following factors could have caused the shift. I narrowed it down to two options
1. Lower official interest rates
2. A fall in the demand for exports

The answer is a fall in the demand for exports which i guessed correctly but could you explain to me why it cant be caused by lower official interest rates?

 

[powlmao]

Lowering in interest rates means more $$$ in wallets. Generally this causes economic growth causing greater demand for goods hence arregate demand increase.

 

[michaeljennings]

ahhh i see LOL im a moron