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in a two sector economy , the consm...

in a two sector economy , the consmption function and invertment function are : C=60+0.8Y and I=60. calculate :
(i) Equilibrium level of income ,
(ii) consumption at equilibrium level and
(iii) saving ata equilibrium level .

Text Solution

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(i) for equilibrium level of income
Y=C+I
(see preceding question )
substituting the values of C and I
`Y=60+0.8Y +60`
` Y-0.8Y=60+60=120`
`0.2 =120`
`(2) /(10)Y=120`
` Y=120xx(10)/(2)=600`
( Equilibrium level of income )
(ii) consumption `C=60+0.8Y ("given ")`
`=60+(4)/(5)xx600`
`=60+480`
`=540`
(iii) saving s=Y (income )-C( consumption )
`=600-540`
`=60`
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