ISI 2011 ME2 Q10- National accounting

[RichaS]

Period 1: Y=C+I+Loan taken
             200=50+50+100

Period 2: C=0.5*200= 100
              Autonomous investment= 50
              Y should be 100+50=150
              But repayment of loan: So Y =150-100=50
              Therefore: 50= 100+50 -(100)
              Therefor savings= (-100)
               No equilibrium

Please help with this

[Abhitesh]

Why no equilibrium will be there?

[RichaS]

Sorry, i think equilibrium is established as RHS=LHS.
But is the solution correct?

[RichaS]

Also,
Period 3: C=0.5*50=25
              I=50
              Y=50+25=75
             

[Abhitesh]

Seems correct.
Final equilibrium implies steady-state when Yt=Yt-1.

[RichaS]

Thanks a lot Abhitesh!