Question

answers the following questions , based on the data below:
1) planned investment= Rs 100 crore,
2) C=50+0.5Y
(a) determine equilibrium level of income
(b) calculate the value of savings at equilibrium level of income
(c) calculate the value of investment multiplier
(d) calculate break even level of income​

Answer 1

Answer:

a 300

b 100

c 2

D 300

Explanation:

i hope this is clear .

Answer 2

Given: planned investment= Rs 100 crore

C=50+0.5Y

Find: Answer the following questions.

Solution:

1) Calculation of equilibrium level of income.

Y=C+I

Y=50+0.5Y

Y-O.5Y=50

0.5Y=50

Y=$\frac{50}{0.5}$

Y=Rs. 300 crore.

2) Calculation of the value of savings at equilibrium level of income.

S=Y-C

300-(50+0.5Y)

300-50-0.5X300

300-200

100

S=Rs. 100 crores.

3) Calculation of investment multiplier.

=$\frac{1}{1-MPC}$

=$\frac{1}{1-\frac{C}{Y} }$

=$\frac{1}{1-\frac{1}{2} }$

=$\frac{1}{\frac{1}{2} }$

=2

Investment multiplier=2

4) Calculation of break even level of income​.

Y=C

Y=50+0.5Y

Y-0.5Y=50

0.5Y=50

Y=100

Break even level of income is Rs. 100 crore.

Final answer:

1. Rs. 300 crore

2. Rs. 100 crore

3. 2

4. Rs. 100 crore

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