From the data given below about an economy. Calculate (a) investment expenditure and (b) consumption expenditure |
(i) Equilibrium level of income 5000 |
(ii) Autonomous consumption 500 |
(iii) Marginal propensity to consume 0.4 |
Answer:
Income Y = 5,000; Autonomous Consumption, a = 500; MPC, \[\overline{C}\] = 0.4 Income = Y = Rs. 5000 Autonomous consumption = \[\overline{c}\] Rs. 500 MPC = c = 0.40 Y = c + I C = \[\overline{c}\]+ cY \[c=500+0.40\times 5000\] \[c\text{ }=\text{ }500\text{ }+\text{ }2000\] c = 2500 Y = C + I 5000 = 2500 + I I = 2500 I = Rs. 2500 c = Rs. 2500
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