Calculate Autonomous Consumption Expenditure from the following data about an economy which is in equilibrium: |
National income = 590 |
Marginal Propensity to save = 0.30 |
Investment expenditure = 100 |
Answer:
Given: National income, Y = 500 MPS = 0.30 Investment expenditure, I = 100 Marginal propensity to consume, \[MPC=1MPS=10.30=0.70\] We know that, \[Y=C+I\] ..... [AD = AS and AD = CI] \[\Rightarrow \] \[\text{Y=}\overline{\text{C}}\text{+b(Y)+I}\] ... [\[\because \]\[C=\overline{C}+I\]] \[\Rightarrow \] \[500=\overline{C}+0.70(500)+100\] \[\overline{C}=500350100\] \[\overline{C}\]= 50
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