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Question
Suppose C = 40 + 0.8Y D, T = 50, I = 60, G = 40, X = 90, M = 50 + 0.05Y, if exports change to X = 100, find the change in equilibrium income and the net export balance.
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Solution
C = 40 + 0.8 YD
T = 50
I = 60
G = 40
X = 100
M = 50 + 0.05Y
`"Equilibrium income"(Y) = A/(1 - c + m)`
`= (C - cT + I + G + X - M)/(1-c+m)`
`= (40-0.8xx50+40+60+100-50)/(1-0.8+0.05)`
`= (40-40+40+60+100-50)/0.25`
`=150/0.25 = (150xx100)/25 = 600`
Net export balance NX = X − M − 0.05Y
= 100 − 50 − 0.05 × 600
= 50 − 0.05 × 60
= 50 − 30 = 20
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