Calculate the Equilibrium level of Income for an imaginary economy, if it is given that : (a) Saving function, S = (-)500 + 0.2 Y where S = Savings, Y = Income (b) Autonomous Investments (I_0) = Rs. 1,500 crore

Question

Accepted Answer

Given: Saving Function: S = -500 + 0.2Y, Autonomous Investment (I₀) = ₹1,000 crores
At equilibrium, S = I
-500 + 0.2Y = 1000
0.2Y = 1500
Y = 1500 / 0.2
Y = ₹7,500 crores
The equilibrium level of income is ₹7,500 crores.