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    Nheath's Avatar
    Nheath Posts: 1, Reputation: 1
    New Member
    		  
    #1

    Nov 12, 2007, 07:35 PM
    Planned Investment
    How do you solve Y=C(Y-T)+I+G when:

    Y=C+I+G
    C=C(Y-T)=125+0.75(Y-T)
    I=200+10r
    G=150
    T=100
    terryg752's Avatar
    terryg752 Posts: 197, Reputation: 4
    Junior Member
    		  
    #2

    Nov 12, 2007, 10:43 PM
    C=C(Y-T)

    Hence Y - T = 1 (or C = 0)

    Taking Y - T = 1 (You may also get a second solution by taking C = 0)

    Y - 100 = 1

    Y = 101

    C = 125+ 0.75 = 125.75

    Y = C + I + G

    101 = 125.75 + I + 150

    I = - 174.75

    200 + 10r = -174.75

    10r = -374.75

    r = -37.475

    Etc.
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