Question

in an economy S= -50+0.5 Y is the saving function ( where ,S=saving and Y =National income ) and investment expenditure is Rs. 7,000 calculate the following :
(i) Equilibrium level of national income ,
(ii) consumption expenditure at equilibrium level of national income .

Answer 1

(i) for equilibrium I=S ( investment = saving )
`7,000=-50+0.05y`
( substituting value of I and S )
`0.5Y = 7,000+50`
` =7,050`
` Y=7,050 xx(10)/(5) =14,100`
for equilibrium Y=C+I
`14,100=C+7,000`
`C=14,100-7,000`
`=7,100`
( consumption expenditure )