Question

Starting from the equilibrium condition \[\bar{C}+\bar{I}+cY=Y\], the rearranged equilibrium condition is:

Options

• \[Y=\bar{C}+\bar{I}+c\]

• \[Y(1+c)=\bar{C}+\bar{I}\]

• \[Y(1-c)=\bar{C}+\bar{I}\]

• \[Y(c-1)=\bar{C}-\bar{I}\]

Answer 1

At equilibrium, AD = AS, so \[\bar{C}+\bar{I}+cY=Y\]. Moving the cY term to the right-hand side gives \[\bar{C}+\bar{I}=Y-cY\], which rearranges to \[Y(1-c)=\bar{C}+\bar{I}\]. Dividing both sides by (1 − c) yields the equilibrium income formula.