Economics 4801
Fall 2009
Dr. Dao
Solution to Quiz 1
a. Y = C + I
Y = 100 + 0.8Y + 50
Y – 0.8Y = 150
0.2Y = 150
Y = 150/0.2 = 750
b. S = -100 + 0.2(750) = 50
c. Equilibrium income will increase to: 200/0.2 = 1000
d. Multiplier = 1/0.2 = 5