Consider the simplified national income model:
Y = C + I…………(1)
Where Y is national income, C is consumption, and I is investment. Consumption is determined by a behavioral equation, which in this problem takes the form
C= 2000+ .9 Y……..(2)
Where Y and C are endogenous variables and Investment is exogenous, and, initially we assume
I =1200……………….(3) Consider the simplified national income model:
Y = C + I…………(1)
Where Y is national income, C is consumption, and I is investment. Consumption is determined by a behavioral equation, which in this problem takes the form
C= 2000+ .9 Y……..(2)
Where Y and C are endogenous variables and Investment is exogenous, and, initially we assume
I =1200……………….(3)
(a) Determine the equilibrium level of national income (Y) and consumption (C) by using the matrix (linear) algebra only.
(b) Determine the overall change (comparative statics analysis) of the equilibrium level of national income (Y) and consumption (C) if I = 600 by using the matrix (linear) algebra only.