Q24 of 25 Page 4

Given consumption function C=100+0.75 Y (where C=consumption expenditure and Y=national income) and investment expenditure Rs.2000 .calculate (i) Equilibrium level of national income (ii) Consumption expenditure at equilibrium level of income

i)The equilibrium level of national income = C+I


Y=100+0.25Y+2000


Y=2100+0.25Y


Y-0.25Y=2100


0.75Y=2100


Y=2100/0.75


Y=2800


II) Consumption expenditure at equilibrium level of income


C = 100+0.75Y


C = 100+0.75*2800


C=100+2100


C=2200


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