Question

An economy is in equilibrium. Calculate the Investment Expenditure from the following
National Income = 800
Marginal propensity to save = 0.3
Autonomous Consumption = 100

Answer 1

Given that
National Income(Y) = 800
Marginal Propensity Save  = 0.3

Therefore,

MPC = 1 - MPS

= 1 - 0.3 = 0.7

`barC = 100`

We know that

Y = C + I

`Y = barC + MPC(Y) + I`

800 = 100 + 0.7 x  800 + I

I = 140

Thus, the investment expenditure is Rs 140.