In an economy, C = 300 + 0.87 and I = 500

(where, C = Consumption, Y = Income and I = Investment). Calculate the following:

(i) Equilibrium level of income.

(ii) Consumption expenditure at equilibrium level of

income.

(i) Here, I = 500, C = 300 + 0.8Y

Now, we know that, Y = C + I

or Y = 300+0.8Y + 500

or Y -0.8Y = 800

or 0.2Y= 800

Y =800/0.2 = 4000

(ii) We know that, Y=C+I

or 4000= C + 500

So, C = 4000 - 500 = 3500