Measure the equilibrium income when consumption function is C = 40 +0.8Y, and Investment (I)= 20.

300

The correct answer is option (4) : 300

To calculate the equilibrium income, we need to find the level of income (Y) at which aggregate expenditure (total spending in the economy) is equal to the total income. In equilibrium, total spending (Aggregate Expenditure) equals total income.

The consumption function is given as : C = 40 + 0.8 Y

And investment is given as : I = 20

In equilibrium Y (income) is equal to the sum of consumption (C) and investment (I). So, we can write the equilibrium condition as :

Y = C+ I

Substitute the values of C and I :

Y = ( 40 + 0.8Y) + 20

Now, solve for Y :

Y = 40 + 0.8Y + 20

Subtract 0.8Y from both sides :

0.2Y = 60

Y =$\frac{60}{0.2}$

So, the equilibrium income is 300.