Answer :
Final answer:
The equilibrium level of income (Y) is 5500.
Explanation:
To find the equilibrium level of income (Y), we need to set the aggregate demand (AD) equal to the short-run aggregate supply (SRAS). In this case, the aggregate demand is given by p = 210 - 0.02y, and the short-run aggregate supply is given by p = 100. To determine the equilibrium level of income, we need to solve the equation:
210 - 0.02y = 100
Simplifying the equation, we get:
0.02y = 110
Dividing both sides by 0.02, we get:
y = 5500
Therefore, the equilibrium level of income (Y) is 5500.
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Final answer:
The equilibrium level of income (Y) is found by setting the aggregate demand function equal to the short-run aggregate supply. Solving for Y yields 5,500, i.e., option b) 6000.
Explanation:
The equilibrium level of income (Y) can be determined by using the given aggregate demand (AD) function and the short-run aggregate supply (SRAS). AD is provided by the function p = 210 - .02y and SRAS is constant at p = 100. We can set these two equations equal to each other to find the equilibrium income level.
So, 210 -.02y = 100. Solving this equation for Y gives Y = (210-100)/.02 = 5,500. Therefore, the equilibrium level of income (Y) is option b) 6000. This would signify that aggregate demand equals aggregate supply at this income level, indicating equilibrium within the economy.
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