Equilibrium GDP

Equilibrium GDP is that
output level at which the total amount of goods produced, GDP, is just equal
to the total amount of goods purchased. In a world with no government or foreign
sector, the amount purchased is *C* + *I _{g}*. Additionally,
GDP and disposable income (DI) are the same, so that our earlier relationship
between consumption and DI holds for GDP as well:

It is more convenient and
traditional to use "*Y*" to represent GDP. Equilibrium GDP is
then found as the solution to the following: *Y* = *C* + *I _{g}*
=

Subtracting *bY* from
both sides of the equation, we obtain *Y* -*bY* = *a* + *I _{g}*.
Next, factor out the common

Following the example in
the text, the consumption schedule is *C* = 97.5 + .75*Y* and *I _{g}*
= 20 billion. Hence, equilibrium GDP is