JAMB 2023 Economics · Question 40

Calculate the equilibrium level of national income (Y) where Y = C + I + G; C = 100 + 0.75Y; I = 50; G = 200

Options

A.2000
B.100
C.1500
D.1400

Answer: D. 1400

Explanation written with AI and checked against the answer key

Step 1: Analyze the question We need the equilibrium national income, where income equals total planned spending: Y = C + I + G. Step 2: Concept In a simple Keynesian model, equilibrium occurs when Y = C + I + G. With C = a + bY, the equilibrium is: Y = (a + I + G) / (1 − b) where b is the marginal propensity to consume (MPC), and 1/(1 − b) is the multiplier. Step 3: Solution Substitute the values: Y = 100 + 0.75Y + 50 + 200 Y = 350 + 0.75Y Y − 0.75Y = 350 0.25Y = 350 Y = 350 / 0.25 Y = 1400 Check: C = 100 + 0.75(1400) = 100 + 1050 = 1150 C + I + G = 1150 + 50 + 200 = 1400 ✓ Step 4: Answer The equilibrium national income is 1400, which is option D. Tip: Always add up the autonomous items first (100 + 50 + 200 = 350), then multiply by the multiplier 1/(1 − MPC). Here the multiplier is 1/0.25 = 4, so 350 × 4 = 1400. Option A (2000) is a trap you would get from a wrong calculation, such as using a different multiplier.

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