An economy is in equilibrium. Calculate the Marginal Propensity to Save from the following: |
National income = 1,000 |
Autonomous consumption = 100 |
Investment = 120 |
Answer:
Given:
National Income (Y) = 1000
Autonomous Consumption (a) = 100
Investment (I) =120
\[Y=C+I\]
\[C=a+bY\]
\[Y=100+b\times 1000+120\]
\[1000120=100+b\]
\[880=100+1000\text{ }b\]
\[880100=1000\text{ }b\]
\[780=1000\text{ }b\]
\[b=\frac{780}{1000}=0.78\]
\[MPC=0.78\]
\[MPS=1-MPC\]
\[=1-0.78\]
= 0.22
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