In an economy C = 200 + 0.5 Y is the consumption function where C is the consumption expenditure and Y is the national income. Investment expenditure is Rs. 400 crores. Is the economy in equilibrium at an income level Rs. 1,500 crores? Justify your answer.

In an economy C = 200 + 0.5 Y is the consumption function where C is t

1.	In an economy C = 200 + 0.5 Y is the consumption function where C is the consumption expenditure and Y is the national income. Investment expenditure is Rs. 400 crores. Is the economy in equilibrium at an income level Rs. 1,500 crores? Justify your answer.
Answer» At the equilibrium level `Y=C+I` Substituting the values `Y={200+0.5 Y}+400` `Y-0.5Y=600` `0.5Y=600` `Y=(600)/(0.5)=1,200` The equilibrium level of income is Rs. 1,200 crores. The given income Rs. 1,500 crore is greater than equilibrium level of income. Therefore, the economy is not equilibrium.