Answer: Option D
:
D
(i) Given, S = - 50 + 0.5Y
and I = 7,000
At the equilibrium level,
$\Rightarrow$ S = I
-50 + 0.5Y = 7,000
0.5Y = 7,000 + 50
0.5Y = 7,050
$Y=\frac{7,050}{0.5}$
$\Rightarrow$ Y = 14,100
(ii) At Y = 14,100
Saving, S = - 50 + 0.5(14,100)
= - 50 + 7,050
$\therefore$ S = 7,000
Consumption expenditure, C = Y - S
$\Rightarrow$ $=14,100-7,000$
$=7,100$
Alternative Method
At equilibrium level,
Saving = Investment
Saving = 7,000
Consumption expenditure, C = Y - S
= 14,100 - 7,000
= 7,100.
(i) Equilibrium level of national income = 14,100.
(ii) Consumption expenditure at equilibrium level of national income = 7,100.