Macroeconomics 5th Edition by Olivier Blanchard

Exercise 9

Use the economy described in Problem 2.
a. Solve for equilibrium output. Compute total demand. Is it equal to production Explain.
b. Assume that G is now equal to 110. Solve for equilibrium output. Compute total demand. Is it equal to production Explain.
c. Assume that G is equal to 110, so output is given by your answer to (b). Compute private plus public saving. Is the sum of private and public saving equal to investment Explain.
Suppose that the economy is characterized by the following behavioral equations:
C = 160 + 0.6 Y D
I = 150
G = 150
T = 100
Solve for the following variables.
a. Equilibrium GDP (Y)
b. Disposable income (YD)
c. Consumption spending (C)