Question

Given the consumption function C = R100 billion + 0.75 (R300 billion), the equilibrium level is equal to:


R100 billion


R225 billion


R300 billion


R325 billion

Answer 1

To find the equilibrium level of consumption (C), we need to plug in the given values into the consumption function.

The consumption function is given by:

\[
C = \text{R}100 \text{ billion} + 0.75 \times (Y)
\]

where \(Y\) is the national income or output. In this case, \(Y\) is R300 billion.

Substituting \(Y\) into the consumption function:

\[
C = R100 \text{ billion} + 0.75 \times R300 \text{ billion}
\]

Calculating the second term:

\[
0.75 \times R300 \text{ billion} = R225 \text{ billion}
\]

Now, adding both parts together:

\[
C = R100 \text{ billion} + R225 \text{ billion} = R325 \text{ billion}
\]

Therefore, the equilibrium level is equal to **R325 billion**.