Question

In an economy S= - 50+50Y is the saving function and investment expenditure is ₹ 7000. Calculate : (i) Equilibrium level of income (ii) Consumption expenditure at equilibrium level of national income.

Answer 1

(i) At equilibrium level of income : S =I, I = 7000 , S = -50 + 0.5 Y`
`7000- = - 50 +0.5Y`
7050 = 0.5Y
Hence, `Y = *=(7050)/(5)xx 10 ₹ 14100`
₹ 14100 is equilibrium level of income.
(iii) Consumption expenditure at equilibrium level of national income
Y = C+ S, C = Y -S
C = 14100-7000 (S=I = 7000)
C = ₹ 7100
Hence, Comnsumption expenditure at equilibrium level of national income is ₹ 7100.