Answer: Option B
:
B
(i) Given, C = 150 + 0.6Y and I = 2,000
At the equilibrium level,
Y = C + I
$\Rightarrow$ Y = 150 + 0.6Y + 2,000 $\Rightarrow$ Y = 2,150 + 0.6Y
Y - 0.6Y = 2,150 $\Rightarrow$ 0.4Y = 2,150
$Y=\frac{2,150}{0.4}=5,375$
(ii) Consumption, C = 150 +0.6(5,375)
= 150 + 3,225 = 3,375
(iii) We know that, Y = C + S
$\Rightarrow$ S = Y - C = 5,375 - 3,375 = 2,000
Alternatively,
Given : C = 150 + 0.6Y,
S = -150 + 0.4Y ($\because$ MPC = 0.6, accordingly MPS = 1 - 0.6 = 0.4)
Or, S= -150 + 0.4(5,375)
= -150 + 2,150 = 2,000.
(i) Equilibrium level of national income = Rs 5,375.
(ii) Consumption expenditure at equilibrium level of national income = Rs 3,375.
(iii) Saving at equilibrium level of national income = Rs 2,000.