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Question : 3
Total: 4
Calculate investment expenditure from the following data about an economy which is in equilibrium.
National Income= 1000
Marginal propensity to save= 0.20
Autonomous consumption expenditure= 100
National Income
Marginal propensity to save
Autonomous consumption expenditure
Solution:
Given,
National Income( Y ) = 1000
Marginal propensity to save (MPS)= 0.20
Autonomous consumption expenditure= 100
MPC( c ) = 1 − = 1 − 0.20 = 0.8
As we know in equilibrium,
Since,Y = C + I
WeC = C + cY
Y = C + cY + I
1000 = 100 + 0.8 ( 1000 ) + I
1000 = 900 + I
⇒ I = 1 0 0
Therefore, investment expenditure is₹ 100
National Income
Marginal propensity to save (MPS)
Autonomous consumption expenditure
MPC
As we know in equilibrium,
Since,
We
Therefore, investment expenditure is
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