Answer: $2500 ⇒ Equilibrium GDP
Explanation:
Given that,
autonomous consumption ([tex]\bar{C}[/tex] )= 500
government purchases(G) = 500
planned investment spending (I) = 500
Net Exports (NX) = (-500)
Y = GDP
MPC (c) = 0.6
Consumption (C) = [tex]\bar{C}[/tex] + cY
= 500 + 0.6Y
Y = AD
Y = C + G + I + NX
Y = 500 + 0.6Y + 500 + 500 + (-500)
0.4Y = 1000
Y = [tex]\frac{1000}{0.4}[/tex]
Y = $2500 ⇒ Equilibrium GDP