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In an economy, S = -100 + 0.6Y is the saving function, where S is saving and Y is National Income. If investment expenditure is 1100. Calculate. (i) Equilibrium level of National Income (ii) Consumption expenditure of equilibrium level of National Income |
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Answer» Solution :SAVING function, `S = -100 + 0.6Y` Investment, `I = 1,100 Y`= NATIONAL income (i) We know that `S = I` Given `S = - 100 + 0.6Y` `rArr I = - 100 + 0.6Y rArr 1,100 = - 100 + 0.6Y` `uarr rArr 1,200 = 0,6Y | Y = 1,200 xx (10)/(6) = 2,000` `:.` Equilibrium level of National Income, `Y = 2,000` (ii) `Y = C + I` `2,000 = C + I rArr C = 2,000 - 1,100 = 900` `:.` Consumption expenditure at equilibrium level = 900 |
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