Calculate investment expenditure from the following data about an economy which is in equilibrium: |
National income = 1000 |
Marginal propensity to save = 0.25 |
Autonomous consumption expenditure = 200 |
Answer:
We know, \[Y=C+I\] \[C=\overline{c}+cY\] \[Y=\overline{c}+cY+1\] Where \[\overline{c}\] = autonomous consumption (200) c = marginal propensity to consume (\[1-MPS=1-0.25=0.75\]) Y = national tricome = Rs. 1000 I = Investment expenditure by putting the value \[1000=200+0.75\times ~1000+I\] \[I=1000-(200+750)\] \[=1000-950\] I = Rs. 50
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