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An Economy is in Equilibrium. Calculate the Investment Expenditure from the Following National Income = 800 Marginal Propensity to Save = 0.3 Autonomous Consumption = 100 - CBSE (Arts) Class 12 - Economics

ConceptConsumption Function and Propensity to Save

Question

An economy is in equilibrium. Calculate the Investment Expenditure from the following
National Income = 800
Marginal propensity to save = 0.3
Autonomous Consumption = 100

Solution

Given that
National Income(Y) = 800
Marginal Propensity Save  = 0.3

Therefore,

MPC = 1 - MPS

= 1 - 0.3 = 0.7

barC = 100

We know that

Y = C + I

Y = barC + MPC(Y) + I

800 = 100 + 0.7 x  800 + I

I = 140

Thus, the investment expenditure is Rs 140.

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Solution An Economy is in Equilibrium. Calculate the Investment Expenditure from the Following National Income = 800 Marginal Propensity to Save = 0.3 Autonomous Consumption = 100 Concept: Consumption Function and Propensity to Save.
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