Multiple Choice Question?!? (1 Viewer)

[dwhelan]

Hey, just wondering if anyone can explain these two HSC multiple choice questions to me:

2002 Q19.

If Y = 200, C = 50, I = 20, G = 40 and M = 30, what is the value of exports?
(A) 60
(B) 110
(C) 120
(D) 140
​

2003 Q8.

What is the equilibrium level of income if C = 100 + 0.8Y and I = 40?
(A) 100
(B) 140
(C) 500
(D) 700
​

(btw, the answers are C and D). THANKS.

 

[Ozza]

Well This will prolly be locked as soon as I answer it, because these both get asked A LOT.

So going back to our components of aggregate demand.

AD = C + I + G + (X-M)

But in equilibrium,

Y = AD

Hence:

Y = C + I + G + (X-M)

Then we subsitute the numbers

200 = 50 + 20 + 40 + (X-30)
90 = X - 30
120 = X

For the 2003 Question,

Simply, Y = C + S + T
And in equilibrium, I = S

Now you are told,

C = 100 + 0.8Y
I = 40

Therefore, from Y= C + S
Y = 100 +0.8Y + 40
0.2Y = 140
Y = 700