Equilibrium Level of Income Calculation:

The equilibrium level of income in an economy can be determined by the intersection of the aggregate demand (AD) and aggregate supply (AS) curves. In this case, we can use the Keynesian cross model to find the equilibrium level of income.

Keynesian Cross Model:

The Keynesian cross model is a simple macroeconomic model that shows the relationship between aggregate demand (AD) and aggregate supply (AS) in an economy. It is based on the assumption that aggregate demand is composed of autonomous consumption (C), investment (I), government spending (G), and net exports (NX).

In this case, we are given that autonomous consumption (C) is equal to 100. Autonomous consumption refers to the minimum level of consumption that occurs even when income is zero. It includes essential expenses such as food, clothing, and shelter.

Given that the marginal propensity to consume (b) is 0.75, it represents the proportion of additional income that is spent on consumption. Therefore, the marginal propensity to save (s) can be calculated as 1 - b, which is 0.25 in this case.

Equilibrium Level of Income Formula:

The equilibrium level of income (Y) can be calculated using the formula:

Y = C + I + G + NX

In this case, we are given that investment (I) is 5000. Government spending (G) and net exports (NX) are not provided, so we assume they are zero for simplicity.

Therefore, the equilibrium level of income can be calculated as follows:

Y = C + I + G + NX
Y = 100 + 5000 + 0 + 0
Y = 5100

Explanation:

The equilibrium level of income is determined by the intersection of aggregate demand (AD) and aggregate supply (AS) curves. In the Keynesian cross model, the equilibrium level of income is where aggregate demand equals aggregate supply.

In this case, we calculate the equilibrium level of income by summing up autonomous consumption (100) and investment (5000). Since government spending and net exports are assumed to be zero, they do not contribute to the equilibrium level of income.

Therefore, the equilibrium level of income is 5100. This means that at an income level of 5100, the total spending in the economy (aggregate demand) is equal to the total production (aggregate supply), resulting in a stable equilibrium. Any deviation from this equilibrium level would lead to changes in production and income to restore equilibrium.