The question is , C=100 8Yd, where Yd is disposable income . Suppose there are no tax and so Y=Yd , investment 50 ,govt expenditure 50 , find savings solving this i got 100 , but solution is 50 , they have equated investment and savings is there an error?
I think the solution is wrong too. The eqbm Y is given by: Y = C + I + G + X ie Y = 100 + 0.8Y + 50 + 50 So, Y* = 1000 By definition, all income recieved is either spent on C or withdrawn, so: Y = C + S + T + M Here: C = 100 + 0.8 * 1000 = 900 So, withdrawals must equal 100. As T = 0 and M isn't mentioned so, we assume it's also 0, so S must equal 100. Or more simply, in eqbm J = W so (assuming X and M = 0 as they're not mentioned in the question): 50 + 50 + 0 = S + 0 + 0 So, S = 100
