Question

Consider the following information (amounts in Kshs. Billions)

 

C = 30 + 0.75Y

R = 20

T = 0.4Y

Z = 65

G = 45

 

Determine:

 

a) Equilibrium National Income

Answer 1

At equilibrium, $Z=Y$

$\implies$at equilibrium $Y=65$

Equilibrium National Income ,$Y=C+G+R-T$

$Y=[30+0.75(65)]+45+20-0.4(65)$

$Y=30+48.75+45+20-26$

$Y=117.75$

Equilibrium National Income = Kshs. 117.75 Billion