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CBSE 2015 Class 12 Economics Outside Delhi Set-2

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Question : 2 of 3
Marks: +1, -0
An economy is in equilibrium. Calculate the Marginal Propensity to Save from the following:
National income =1,000=1,000
Autonomous consumption =100=100
Investment =120=120
Solution:  
Given :
National Income (Y)=1000(Y)=1000
Autonomous Consumption (a) =100=100
Investment (I)=120(I)=120
Y  =C+1Y\;=C+1
C  =a+bYC\;=a+b Y
Y  =100+b×1000+120Y\;=100+b \times 1000+120
1000−120  =100+b1000-120\;=100+b
880  =100+1000b880\;=100+1000 b
880−100  =1000b880-100\;=1000 b
780  =1000b780\;=1000 b
b  =  7801000=0.78b\;=\;\frac{780}{1000}=0.78
∴       MPC     =0.78\therefore \;\; \;\text{ MPC }\;\;=0.78
   MPS     =1−   MPC   \;\text{ MPS }\;\;=1-\;\text{ MPC }\;
  =1−0.78\;=1-0.78
  =0.22\;=0.22
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