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