Question

Given that, $\text{S}=-25+0.5\text{Y}$ and $\text{I}=5,000$, find equilibrium Y and equilibrium C.

Answer 1

In equilibrium, $\text{S = I}$

So that, $-25+0.5\text{Y}=5,000$

Or, $0.5\text{Y}=5,000+25\Rightarrow 0.5\text{Y}=5,025$

$\therefore \text{Y}=\frac{5,025}{0.5}=10,050$

S at equilibrium: $\text{S}=-25+0.5(10,050)$

$=-25+5,025=5,000$

We know, $\text{Y =C+S}$

Or, $\text{C =Y-S}$

Thus, at equilibrium, $\text{C =10,050-5,000}$

$=5,050$