Question

When C = 100 + 0.5Y and I = 1,000, equilibrium Y = .

• A. 2,200
• B. 4,500
• C. 2,000
• D. 733.33

Answer 1

The correct option is A 2,200

Equilibrium is struck when: AS = AD

Or, when Y = C + I

Substituting the values of C and I, we get: Y = 100 + 0.5Y + 1,000

Or, Y - 0.5Y = 100 + 1,000

Or, 0.5Y = 1,100

Therefore, Y = $\frac{1,100}{0.5}$ = 2,200