The saving function of an economy is S=-200+0.25Y.The economy is in equilibrium when income is equal to 2000. Calculate
(i) Investment expenditure at equilibrium level of income (ii) Autonomous consumption (iii) Investment multiplierHey, the solution to your query is provided below:
1) At equilibrium, planned savings are equal to planned investments.
Savings Function = -200 +0.25Y
Putting the value of Y we get, S = -200 + 0.252,000 = -200 + 500 = 300
Investment expenditure at equilibrium level of income = 300
2) Autonomous consumption means the level of consumption expenditure when income is zero.
Y = 0
S = -200
Autonomous Consumption = 200
3) Investment Multiplier =
1) At equilibrium, planned savings are equal to planned investments.
Savings Function = -200 +0.25Y
Putting the value of Y we get, S = -200 + 0.252,000 = -200 + 500 = 300
Investment expenditure at equilibrium level of income = 300
2) Autonomous consumption means the level of consumption expenditure when income is zero.
Y = 0
S = -200
Autonomous Consumption = 200
3) Investment Multiplier =