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Question : 2
Total: 3
An economy is in equilibrium. Calculate the national Income from the following:
Autonomous Consumption= 120
Marginal Propensity to Save= 0 . 2
Investment Expenditure= 1 5 0
Autonomous Consumption
Marginal Propensity to Save
Investment Expenditure
Solution:
Autonomous Consumption = 120
MPS = 0.20
(b) MPC = 1 − MPS = 1 − 0.20 = 0.86
I = 150
Y = ?
Y = C + I
C = a + by
= 120 + 0.8 Y
Y = 120 + 0.8 Y + 150
1 Y − 0.8 Y = 270
0.2 Y = 270
∴ Y =
= 1350
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