Question
Y = C + I + G + X - M gives the national income model. Where C stands for Consumption. I stands for investment.
Y = C + I + G + X - M gives the national income model.
Where C stands for Consumption.
I stands for investment.
G stands for government spending.
X stands for exports.
M for Important
There are certain endogenous factors that change the equation as follows:
Y = a - b (Y - T0) + I + gY + X - M
Let C = 100 + 0.75YD
T = -80 + 0.2Y
I equals 300.
G is equal to 330
Solving,
Y = 110 + 0.75 [Y - (-80 + 0.2Y) + 300 + 330
Y = 740 + 0.75 (0.8Y + 80)
740 + 0.6Y + 60 = Y
800 = Y - 0.6Y
The national income of the United States is Y* = 800/0.4 = 2000.
Task: Please solve for all endogenous variables to ensure the calibrated model is a match. Show all work.
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