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Calculate Investment Expenditure from the Following Date About an Economy Which is in Equilibrium : National Income = 1000 Marginal Propensity to Save = 0.20 Autonomous Consumption Expenditure = 100 - CBSE (Arts) Class 12 - Economics

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Question

Calculate investment expenditure from the following date about an economy which is in equilibrium :
National Income = 1000
Marginal propensity to save = 0.20
Autonomous consumption expenditure = 100

Solution

Given that

National income (Y) = 1000

Marginal propensity to save (MPS) = 0.20

Autonomous consumption expenditure = 100

MPC(c) = 1 - MPS = 1 - 0.20 = 0.8

 As we know that

Y= C + I

Since `C = barC + cY`

We have

`Y = barC + cY + I`

`1000 = 100 + 0.8(1000) + I`

1000 = 900 + I

I = 100

Therfore, investment expenditure is Rs 100.

 

 

  Is there an error in this question or solution?
Solution Calculate Investment Expenditure from the Following Date About an Economy Which is in Equilibrium : National Income = 1000 Marginal Propensity to Save = 0.20 Autonomous Consumption Expenditure = 100 Concept: Classification of Expenditure.
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