Answer:
Given that, Marginal propensity to consume (MPC) =0.6 Initial income = Rs. 100 crores Autonomous investment = Rs. 80 crores \[C=\overline{C}+c\left( Y \right)\] C=0+0.6(Y) Income (Rs.) Consumption Saving (Rs.) Investment 100 60 40 80 200 120 80 80 300 180 120 80 400 240 160 80 500 300 200 80 Aggregate Demand (AD) = Aggregate Supply (AS) AD = C + 1 and AS = C + S Therefore, the equilibrium level of income is Rs. 200 crores.
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