From the following data about an economy, calculate

CBSE Class 12 CBSE Class 12 Economics
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1

From the following data about an economy, calculate:
(i) Equilibrium level of National Income.
(ii) Total consumption expenditure at equilibrium level of National Income.
(a) C = 200 + 0.5Y is the consumption function, where C is consumption expenditure and Y is National Income.
(b) Investment expenditure is 1,500.

2

Given,
C =200+0.5Y
Investment expenditure =1500
At equilibrium, Y = C +I … (a)
Y = 200 +0.5Y +1500 = 1700 +0.5Y
Y - 0.5Y = 1700,0.5Y = 1700, so, Y = 3400
C = 200 + 0.5Y = 200 + 0.5 (3400) = 200 +1700 = 1900
(i) Equilibrium level of National Income = 3400
[from equation (a)]
(ii) Total consumption expenditure at equilibrium level of National Income = 1900