jnu 2011

[seema]

Consider an economy wherein equilibrium level of aggregate income Y is the  sum of aggregate investment expenditure I and aggregate consumption expenditure C. For values of Y less than equal to 1500, C=200+0.6Y and any amount of aggregate income in excess of 1500 currency units is entirely saved in the economy. If the full employment level of Y=1750, the minimum value of I necessary to ensure full employment in the economy is
a) 500
b) 550
c) 600
d) none of the above

[neha]

I think it will be 650 as consumption is restricted to 1100

[lovekesh]

yeah, i also got the same answer.

[a.m]

could you please elaborate?

[kratika]

i think it will be done as follows-
if y=1500 in equilibrium 1500=200+0.6(1500)+ I
implies I=400

we are given that any income above 1500 will be saved so we will add that amount to investment, hence we get I=400+ (1750-1500)= 650