Question

An economy is in equilibrium. From the following data about an economy, calculate investment expenditure:

1) Income = 10000

2) Marginal propensity to consume = 0.9

3) Autonomous consumption = 100

Answer 1

Given that

Income(Y) = 10,000

MPC (c) = 0.9

Autonomous Consumption `(barC)` = 100

Aswe know that

Y = C + l

C = C + cY

By substituting the values,we get

C = 100 + 0.9

C = 9100

Y = C + l

l = 10,000 - 9,100

l = 900