Suppose an economy has output of 2100, government spending of 40, consumption of 1600, and absorption of 1940. Calculate the equilibrium values of investment and net exports
What will be an ideal response?
Since absorption = C + I + G, then 1940 = 1600 + I + 40, so I = 1940 - 1640 = 300. Net exports = Y - absorption = 2100 - 1940 = 160.
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