Question

Calculate the equilibrium level of income if C = R100 million + 0,8Y and Ī = R125 million.[5]

Answer 1

equilibrium level of income is when AS=AD. Formula is Y=C+I+G

Where Y=aggregate income, C=consumption, I = investment expenditure, G = government expenditure

C = R100 million + 0,8Y and Ī = R125 million

Hence equilibrium level of income Y = (100+0.8Y)+125

0.2Y = 225

Y = 1125