In an economy :
Consumption  C = 50 + 0.80 Y
Investment I = 70
(i)    Find the equilibrium level of income and consumption at equilibrium.
(ii)    Derive and equation for the saving function and calculate savings at equilibrium.
(iii)    Find equilibrium level of income by equating planned saving and planned investment.

(i)    We know that Y = C + I
     Since           C = 50 + 0.80Y and I = 70
                        Y = 50 + 0.80 Y + 70
     Or        0.20 Y = 120 which gives Y =120/0.20 = Rs. 600
                        C =  50 + 0.80 X 600 = Rs. 530
(ii)    Saving function is given by
                        S =  Y-C = Y- (50 + 0.80 Y) = 0.20 Y -50
      Or               S = 0.20Y-50
      At equilibrium, S = 0.20 X 600 =50 Rs. 70
(iii)    Planned saving is given by
                           S = 0.20Y-50
In equilibrium, planned saving is equal to planned investment , i.e., 0.20Y-50 = 70 which gives 0.20Y =120
 Or                                   Y = 120/0.0 = Rs. 600