Question

In an economy: C = 200 + 0.75 Y (where C is consumption expenditure and Y is National Income). Investment expenditure is ₹ 4,000 Crore. Calculate the following:

1. Equilibrium level of income.
2. Total consumption expenditure at equilibrium income level. 

Answer 1

i. At Equilibrium y = C + I

Y = 200 + 0.75 Y + 4000

0.25 Y = 4200

Y = 16800 

ii. C = 200 + (0.75) × 16800 

= 12800