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An economy is in equilibrium. Calculate Marginal Propensity to Save from the following :

National Income = 1,000

Autonomous Consumption = 100

Investment Expenditure = 200

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#### Solution

**Given***Y *= 1,000*I = **200*

C = 100

We know that at equilibrium,

Y = C + I

Y = C + cY + I

1, 000 = 100 + c \times 1, 000 + 200

1, 000c = 1, 000 - 100 - 200

1, 000c = 700

c or MPC = \frac{700}{1, 000} = 0 . 7

Thus,

MPS = 1 - MPC = 1 - 0 . 7 = 0 . 3

Concept: Consumption Function and Propensity to Save

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