question_answer

In an economy, \[S=-80+0.6\,\,Y\]is the saving function (where, S=Savings and Y=National Income) and investment expenditure is Rs. 4,000. Calculate equilibrium level of National Income (Y).

Answer:

Saving Function of an economy             \[(S)=-80+0.6y\] Investment Expenditure in the Economy (/) = Rs. 4,000 We know that at equilibrium level of income, Savings == Investment \[\therefore \]      \[4,000=-80+0.6Y\] 4,000+80=0.6 Y \[\frac{4,080}{0.6}=Y\]=Rs. 6,800 Hence, Equilibrium level of income = Rs. 6,800