ci) You are
given the following in formation
about an economy:
C=100+ 0.87
I = Rs. 50 crore
(a) What is the level of saving in equilibrium?
(b) If, for some reason , output were at
the level of Rs. 800 crore, what would
the level of unplanned inventory
accumulation be?
Answers
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Explanation:
Consumption Function is C = 100+ 0.75 Y where Y in the income in the economy.
At equilibrium level of income,
AS=AD
Y= C+I
=> Y= 100 + 0.75 Y + 150
=> Y - 0.75 Y = 100 + 150
=> 0.25 Y = 250
=> Y = 250/ 0.25 = Rs. 1,000 crores
(II) Consumption Function is C = 100+ 0.75 Y where Y in the income in the economy.
At equilibrium level of income,
C= 100 + 0.75 ( 1,000)
= 100 + 750
= Rs. 850 crores
Savings = Investments
= Rs. 150 crores
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