Consider the macroeconomic model:
Y = C + I ————— (2)
C = a + b√Y
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Here: Y is national income, I is fixed investment that does not depend upon C or Y,and a > 0 and b > 0 are parameters. C stands for total consumption by all agents in the economy and, as can be seen from the second equation above, depends upon the level of national income.
(a) Solve for Y . This is called the equilibrium level of income in the
Hint: It might help if you define Z = √Y so that Z^2 = Y. You should end up with a quadratic equation to solve. Get Economics homework help today
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