1.

In an economy the autonomous investment is 100 and the consumption is C=80+0.4Y. Is the economy in equilibrium at an income level 400? Justify your answer.

Answer» At equilibrium
`AD=Y`
`AD=C+I=Y`
`80+0.4+100=Y`
`0.6Y=180`
`Y=(180)/(0.6)=300`
since the given income of 400 is greater than the equilibrium level of income , the economy is not at equilibtium It is at a situation where aggregate demand is greater than the aggrefate output produced in the economy .


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