Question

An economy is in equilibrium. Calculate the National Income from the following :
Autonomous Consumption = 120
Marginal Propensity to Save = 0.2
Investment Expenditure = 150

Answer 1

Given that

`barC = 120`

MPS(s) = 0.2

i.e MPC(c) = 1-  MPS = 1 - 0.2 = 0.8

I = 150

We knoiw that

Y = C + I

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

`Y = 120 + 0.8Y + 150`

0.2Y = 270

Y = 1350