When C = 70+0.5Y and I = 40, what is the equilibrium income?

The correct answer is Option (3) → 220

We are given the following:

• Consumption function: C=70+0.5Y

• Investment (I): 40

• Equilibrium condition: Y=C+I

Plug values into the equilibrium condition:

Y = (70+0.5Y)+40

Y=110+0.5Y 

0.5Y=110

Y = 220