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In an economy C = 500 + 0.9 Y and I = 1000 (where C = Consumption, Y = Income, I = Investment Calculate the following:

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In an economy C = 500 + 0.9 Y and I = 1000 (where C = Consumption, Y = Income, I = Investment Calculate the following: 

(a) Equilibrium level of income

(b) Consumption expenditure at equilibrium level of income

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1 Answer

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At Equilibrium Y = C + I 

→ Y = 500 + 0.9 Y + 1000 

→ 0.1 Y =1500 

→ Y = 15000

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