Question

Give that, S = - 25 + 0.5Y and I = 5,000, find equilibrium Y and equilibrium C.

• A. Y = 5,050
  C = 5,050
• B. Y = 5,050
  C = 10,050
• C. Y = 10,050
  C = 10,050
• D. Y= 10,050
  C = 5,050

Answer 1

The correct option is D

Y= 10,050
C = 5,050

In equilibrium, S = I

So that, -25 + 0.5Y = 5,000

Or, 0.5Y = 5,000 + 25 $\Rightarrow$ 0.5Y = 5,025

$\therefore$ $Y=\frac{5,025}{0.5}=10,050$

S at equilibrium: S = - 25 + 0.5 (10,050)

= - 25 + 5,025 = 5,000

Y = C + S

Or, C = Y - S

Thus, equilibrium C = 10,050 - 5,000

= 5,050.