What will be the equilibrium level when planned investment in Rs 200 crore and C = 60 + 0.7Y ?

867

The correct answer is Option 2: 867

The equilibrium level of income can be determined with the help of:

Y = C + I ( at equilibrium level)

Y =  (c̅ + bY) + I

Y = 60 + 0.7Y + 200

Y = 260 + 0.7Y

Y - 0.7Y = 260

0.3Y = 260

Y = \(\frac{260 }{0.3}\)

Y = 867