question_answer

An economy is in equilibrium. Find investment expenditure:

National Income                                  = 1000

Autonomous Consumption     = 100

Marginal Propensity to consume          = 0.8

Answer:

National Income (Y) = 1000

Autonomous Consumption (C) = 100

Marginal propensity to consume (c) = 0.8

At Equilibrium, \[Y=C+I\]

\[Y=C+cY+I\]

\[1000=100+\,(0.8\times 1000)\,+I\]

\[1000=100+(800)+I\]

\[1000=900+I\]

\[1000900=I\]

I = Rs. 100.

Investment expenditure = Rs. 100