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Solution
The expenditure E components C + I + X – M add to total production or income, Y.
Hence
Y = E = C + I + X - M
Y = (100 + 0.75 Y) + 560 + 350 - (40 + 0.15 Y)
Y = 970 + 0.6Y
Y - 0.6Y = 970
0.4Y = 970
Y = 970/0.4 = 2,425
Therefore the equilibrium level of income is US$ 2,425 billion
Zainabdawa answered the question on August 1, 2018 at 08:49
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