Posted by: clairvoyant December 15, 2005
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Y = C+I+G+X-IM
Since there is no government and international sector,
G=o, X=0, and IM=0
Now,
Y = C+I
Y= a+bY+I
where autonomous consumption=0,
Y-bY = I
Y(1-b) = I
b=change in consumption/change in income =0.5
Therefore equilibrium income = I/1-b =50/1-0.5 =100.