Question

Given the following information, state whether the economy is in equilibrium or not:

S. No.	Particulars	Amount
(i)	Autonomous Consumption & Investment Expenditure `(barA)`	₹ 700 crores
(ii)	Marginal Propensity to Consume (MPC)	0.8
(iii)	National Income	₹ 4,000 crores

Answer 1

A = ₹ 700 crores

MPC = 0.8

National Income (Y) = ₹ 4,000 crores

For an economy to be in equilibrium.

Y = A + MPC (Y)

= 700 + 0.8 × 4000

= 700 + 3,200

= ₹ 3,900 crores

∴ The economy is not in equilibrium.