Economics....?

Question

If AE = 1200 + 0.95Y, what is the equilibrium level of real income?

A) $3000

B) $3600

C) $15000

D) $24000

Answer 1

Aggregate expenditure always equal aggregate ouput  ( a macro-econmic identity.

AE =Y

Thus, Y= AE= 1200+0.95Y

or,  0.05Y= 1200

or Y= 1200/0.05= (1200*100)/5= 120000/5= 24000

So the correct answer is

D)  $24,000

Answer 2

D) $24000

1.00Y = 1200 + 0.95Y

0.05Y= 1200

Y=1200/0.05 = 24000