There are 2 fundamental equations to the model:
  (1) Spending: AE = C + I + G + (X-M)
  (2) Equil.: AE = Y

To solve:
    Step 1: Substitute for each term in equation (1) until AE=f(A,Y), where A = autonomous spending.
    Step 2: Use equation (2) to substitute Y for AE in equation (1)
    Step 3: Rearrange terms to solve for Y.
 
Example 1: Equations (1) and (2) above plus:
    (3) C = 100 + .75Y
    (4) I = 90
    (5) G = 100
    (6) X - M = 10

After step 1, the expression for: AE=____________
At the equilibrium Y:    Y=_____    C=_____    S=_____
 
 Add the AE line and label the equilibrium in the diagram to the right.
 
 
Exmple 2: Equations (1) and (2) above plus:
    (3) T = 50 + .25Y
    (4) DY = Y - T
    (5) C = 140 + .8DY
    (6) I = 100
    (7) G = 240
    (8) X - M = 40

    Note now that consumption is a function of disposable income (DY) which in turn as function of Y. So first express C as a function of Y:
    Substitute (3) into (4) to express DY as a function of Y: DY=____________
    Now substitute for DY in (5) to express C as a function of Y: C=____________
That's it. Now you're ready to solve for Y as before.
After step 1, the expression for: AE=____________
At the equilibrium Y:
   Y=_____    T=_____    DY=_____    C=_____    S=_____

 Add the AE line and label the equilibrium in the diagram to the right.