In an economy, S = -100 + 0.4y is the saving function (where S= saving and Y = national?income) and investment expenditure is?? 4,000. Calculate. ? ???

I.Equilibrium level of national income, and

ii Consumption expenditure at equilibrium level of national income.

iii .MPC

Dear student
We are given: 
S = -100 + 0.4Y
Investment expenditure is 4,000
i) Equilibrium level of income: 
We know that at equilibrium S=I. So, substituting I in place of S: 
S = -100 + 0.4Y
4000=-100+0.4Y
4000+100=0.4Y
4100/0.4=Y
10,250=Y

ii) Consumption expenditure at equilibrium level:
Y=C+I
10,250=C+4000
10,250-4000=C
6,250=C

iii) MPC= C/Y = 6250/10250 = 0.60

Regards
 

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