Question

Answer the following questions based on the data given below:(i) Planned investment = * 200 crores(ii) C = 50 + 0-8YDetermine the equilibrium level of income.Calculate the saving and consumption expenditure at equilibriumlevel of income.​

Answer 1

Answer:

ANSWER

(i) At equilibrium,

 AS=AD

Y= C+I 

=> Y= 200 + 0.5 Y + I 

=> Y - 0.5 Y = 200 + 1,500

=> 0.5 Y = 1,700

=> Y = 1,700/ 0.5 = 3,400

(ii) Consumption Function, C = 200+ 0.5 Y where Y in the income in the economy. 

So at national income 3,400 , consumption expenditure is 

 C = 200+ 0.5 ( 3,400) 

    = 200 + 1,700

    = 1,900