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Question
Calculate equilibrium level of income for a hypothetical economy, for which it is given that:
- Autonomous Investments = ₹ 500 crores, and
- Consumption function, C = 100 + 0.80Y
Solution
Given Consumption function is,
C = 100 + 0.8Y
Autonomous investments = 500 crores
We know, at equilibrium level
Y = C + I
Y = 100 + 0.8Y + 500
Y − 0.8Y = 600
0.2Y = 600
Y = ₹ 3,000 crores
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