Suppose C = 40 + 0.8YD, T = 50, I = 60, G = 40, X = 90, M = 50 + 0.05Y.
In the above example, if exports change to X = 100, find the change in equilibrium income and the net exports balance.
Given, C = 40 + 0.8 YD
T = 50
l = 60
G = 40
X = 100
M = 50 + 0.05Y
Equilibrium income = C - cT + I + G + X - M1 - c + m
=40+0.8×50+40+60+100−501−0.8+0.05
= 40−40+100+100−500.25
= 15025×100=600
NX = X - M - mY
Net export balance:
NX = X - M - 0.05Y
= 100 - 50 - 0.05 × 600
= 50 - 30 = 20