You are given the following data concerning Freedonia, a legendary country: Consumption Function: C = 200 + 0.8Y Investment: I = 200 Aggregate Expenditure Function: AE = C + I Equilibrium: AE = Y Calculate the following: a. The level of equilibrium income, Y = nothing. (Enter your response as an integer.)

10,000

Explanation:

Let the following equations

(1) C = 200 + 0.8Y

(2) AE = C + I

(3) I = 200

In an open economy, equilibrium income equals the sum of aggregate expenditures: consumption + investment

(4) In equilibrium: AE = Y

So aggregating (2) and (4) we have: C + I = Y

solve for Y:

200 + 0.8Y = Y

Then: 0.2Y = 200

Y = 10.000

The equilibrium income is 10,000