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Given consumption function C=100+0.75...

Given consumption function C=100+0.75 Y ` ( where ,C= consumption expenditure and Y=National income ) and investment expenditure Rs. 1,000 calculate the following :
(i) Equilibrium level of national income ,
(ii) consumption expenditure at equilibrium level of national income .

Text Solution

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(i) for equilibrium` Y=C+I(i.e., As=AD)`
`Y=100+0.75 +1,000`
(given C=100+0.75Y)
` Y-0.75 Y= 1,100 or `
` 0.25 Y = 1,1,00`
( equilibroum level of income
`(ii) C= 100+0.75 Y ( "given" ) `
`=100+0.75 xx4,400`
`=100+(3)/(4) xx4,400`
`=3,400`
( condumptio expenditure )
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