# Aggregate Expenditure Equation and Income Equilibrium

## What is the equation for aggregate expenditure and income equilibrium?

Can you solve for income (y) in the given equation?

## Aggregate Expenditure Equation and Income Equilibrium

The equation for aggregate expenditure is: ae = $3600 – 0.8y. In equilibrium, income 'y' equals aggregate expenditure 'ae'. So, the equation can be rewritten as: y = $3600 – 0.8y. To solve for 'y' in the equation y = $3600 - 0.8y, you can isolate 'y' on one side of the equation.

## Understanding Aggregate Expenditure Equation and Income Equilibrium

The aggregate expenditure equation provides a way to calculate the total spending in an economy. In this case, the equation is ae = $3600 – 0.8y. This means that the total spending (ae) is equal to $3600 minus 80% of the income level (y).

To find the income equilibrium, we set income (y) equal to aggregate expenditure (ae): y = ae. By substituting the values, we get y = $3600 – 0.8y. This equation helps us determine the income level at which spending equals income.

To solve for 'y' in the equation y = $3600 - 0.8y, we follow these steps:

**Step 1:**Start with the original equation: y = $3600 - 0.8y

**Step 2:**Add 0.8y to both sides of the equation to move the y term to one side: y + 0.8y = $3600

**Step 3:**Combine the y terms on the left side: 1.8y = $3600

**Step 4:**Divide both sides by 1.8 to isolate 'y': (1.8y) / 1.8 = $3600 / 1.8

**Step 5:**Simplify the right side: y = $2000

Therefore, in equilibrium, when income (y) equals aggregate expenditure (ae), the income level is $2000.