Consider a 2-sector economy. If S = -200 + 0.2Y and I = 100, then the equilibrium level of income is

Question

BlackTom AI · Accepted Answer

We’re told to use a two-sector framework where in a closed economy with no government or external trade, the equilibrium condition is S = I.

First, lay out the given functions: S = -200 + 0.2Y and I = 100.

Next, set savings equal to investment for equilibrium: -200 + 0.2Y = 100.

Solve for Y: add 200 to both sides to get 0.2Y = 300; then divide both sides by 0.2 to obtain Y = 300 / 0.2 = 1500.

Thus, the equilibrium income level that satisfies S = I is 1,500. In the provided data, the only listed numerical option is 1,500, which is consistent with the calculation.

Note: The problem presents an empty set of answer options, so there is no alternative choice to compare against here. The core reasoning hinges on the identity S = I in a simple two-sector model and solving the resulting linear equation for Y.

ECON1002 Introductory Macroeconomics

Consider a 2-sector economy. If S = -200 + 0.2Y and I = 100, then the equilibrium level of income is

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