Calculate equilibrium level of income for a hypothetical economy, for which it is given that:

    1. Autonomous Investments = ₹ 500 crores, and 

    2. Consumption function, C = 100 + 0.80Y

(2 Marks)

Answer

Given Consumption function is,

C=100+0.8 Y

Autonomous Investments=500 crores

We know, at equilibrium level

Y=C+I Y

Y=100+0.8 Y+500

Y-0.8Y=600

0.2 Y =600

Y= ₹ 3,000 crores

Equilibrium level of Income = Rs 3000 crores

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CA Maninder Singh is a Chartered Accountant for the past 13 years and a teacher from the past 17 years. He teaches Science, Economics, Accounting and English at Teachoo