question_answer

C = 50 + 0.5Y is the consumption function where C is consumption expenditure and Y is National Income and investment expenditure is 2,000 in an economy.

Calculate Equilibrium level of (National Income) Consumption expenditure of equilibrium level of national income.

Answer:

Y = National Income, Consumption Function, \[C=50+0.5\]Investment, I= 2,000

(i) \[V=CIor\text{ }Y=\text{ }50+0.5Y+2,000\]

or         \[0.5V=50+2,000=2,050\]

or         \[Y=2,050\times \frac{10}{5}~=4,100\]

\[\therefore \]      Equilibrium level of National Income = 4,100

(ii)        Given, \[C=50+0.5V\]

\[C=50+0.5(4,100)\]

\[0=50+2,050=2,100\]

\[\therefore \]      Consumption expenditure at equilibrium level = 2,100