Autonomous planned investment is C280. Autonomous consumption is C20. The marginal propensity to consume is $\frac{18}{20}$. There are no taxes and no exports or imports.

What is the equilibrium level of real GDP?

If your answer is 6.115, enter 6.12. If appropriate, remember to enter the - sign.

(Note: C is the symbol for the cedi, the official currency of Ghana.)

To determine the equilibrium level of real GDP, we can use the Keynesian cross model, which states that equilibrium occurs when aggregate expenditure (AE) is equal to real GDP (Y).

Aggregate expenditure is the sum of consumption expenditure (C) and investment expenditure (I):

AE = C + I

Given the information provided:

Autonomous consumption (C₀) = C20

Marginal propensity to consume (MPC) = 18/20 = 0.9

Autonomous planned investment (I₀) = C280

We can express consumption (C) as a function of real GDP (Y) using the MPC:

C = C₀ + MPC * Y

Substituting the given values:

C = 20 + 0.9Y

Now, we can express aggregate expenditure:

AE = C + I

= (20 + 0.9Y) + 280

= 300 + 0.9Y

To find the equilibrium level of real GDP, we set AE equal to Y:

Y = AE

Y = 300 + 0.9Y

Next, we solve for Y:

Y - 0.9Y = 300

0.1Y = 300

Y = 300 / 0.1

Y = 3000

Therefore, the equilibrium level of real GDP is 3000.

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