jnu 2011

[manisha sachdeva]

consider an economy where in equilibrium level of aggregate income is the sum of aggregate invetment and consumption expenditure.
for values of y less than or equal to 1500,c=200+0.6y and any amount of aggregate income in excess og 1500 is entirely saved in economy.
if full employment level of y=1750,the minimum value of investment necessary to ensure full employment in economy will be?
for reference its 11 th ques from 2011 jnu sss.
plz explain the steps

[Homer Simpson]

Answer is 650

at Y=1500, I = 400 (using the Y=C+I equation)

for Y>1500,
        => Delta Y = Delta I (as consumption becomes some fixed value now)

I need investment to rise by 250 to get to Y=1750. Thus, investment level = 400+250 = 650