Question

In an economy S = -100 + 0.6 Y is the saving function, where S is saving and Y is National Income. If investment expenditure is 1100, calculate : 

1- Equilibrium level of National Income. 

2- Consumption expenditure at equilibrium level of National Income.

Answer 1

1. S = I

-100 + 0.6 Y = 1100

0.6 Y = 1200

Y = 1200/0.6 = 2000

2. Y = C + S

C = Y - S

= 2000 - 1100

= 900