Answer to Question #134602 in Macroeconomics for lesego

Question

You are given the following information about a closed economy with no government: Consumption = 115 + 0.6Y Investment = 550 Use the above information to answer the questions that follow:
Q.4.4 Is the equilibrium level of income also the full employment level of income? Explain your answer

Answer 1

The equilibrium level of income may not be the full employment level of income in cases of recessionary or inflationary gap. So, the statement is incorrect.