Question

An economy is in equilibrium. Calculate national income from the following :
Autonomous consumption = 100
Marginal propensity to save = 0.2
Investment expenditure = 200

Answer 1

Autonomous consumption `(barC) = 100`
Marginal propensity to save (MPS) 0.2
Investment expenditure (I) = 200
We know that ,
Marginal propensity to consume (MPC) = 1 - MPS = 1 - 0.2 = 0.8

We know that at equilibrium,

National Income  (Y) = C + I

or 

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

Y = 100 + 0.8Y + 200

Y =  0.8Y + 300
Y - 0.8Y = 300
0.2Y = 300

Therefore, Y = 1,500