Calculate the equilibrium level of national income (Y) where…

Explanation

Step 1: Write the equilibrium equation
Y = C + I + G
Where:
Y = National Income
C = Consumption = 100 + 0.75Y
I = Investment = 50
G = Government Spending = 200

Step 2: Substitute the values into the equation
Y = (100 + 0.75Y) + 50 + 200
Y = 100 + 0.75Y + 50 + 200

Step 3: Combine constant terms
Y = 350 + 0.75Y

Step 4: Solve for Y
Y – 0.75Y = 350
0.25Y = 350
Y = 350 / 0.25
Y = 1,400

Conclusion: The equilibrium national income is ₦1,400. At this level, total spending (C + I + G) equals total income (Y). The consumption function shows that 75% of income is consumed (0.75Y is the marginal propensity to consume), while 100 is autonomous consumption.