From the following data about an economy, calculate (a) equilibrium level of national income and (b) total consumption expenditure at equilibrium leve

Question

From the following data about an economy, calculate (a) equilibrium level of national income and (b) total consumption expenditure at equilibrium leve

From the following data about an economy, calculate (a) equilibrium level of national income and (b) total consumption expenditure at equilibrium level of national income.
(i) `C = 200 + 0.5 Y` is the consumption function where C is consumption expenditure and Y is national income.
(ii) Investment expenditure is 1,500

Monjur Alahi

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2025-01-04 04:42

1 Answers

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Salim Ahmed Kawsar · Accepted Answer · 2023-02-05T15:29:48+06:00

Given, consumptin function, C= 200 + 0.5Y. Investment, I = 1,500
We know that, `Y = C + I`
`Y = 200 + 0.5 Y + 1,500 or Y = 1,700 + 0.5Y`
or `0.5Y = 1,700 " " or Y = 1,700 xx (10)/(5) = 3,400`
(a) Equilibrium level of National Income, `Y = 3,400`
(b) Total Consumption Expenditure, `C = 200 + 0.5Y`
`= 200 + 0.5 (3,400)`
`= 200 + 1,700 = 1,900`