Calculate Marginal Propensity to Consume from the following data about an economy which is in equilibrium: |
National income = 2000 |
Autonomous consumption expenditure = 200 |
Investment expenditure = 100 |
Answer:
Given, National Income (Y) = 2000 Autonomous consumption expenditure = 200 Investment expenditure =100 As we know in equilibrium, \[Y=C+I\] Since, \[C=C+cY\] We get \[Y=C+cY+I\] \[2000=200+c\left( 2000 \right)\text{ }+\text{ }100\] \[1700=2000c\] \[\Rightarrow \] \[c=0.85\] Therefore, marginal propensity to consume is 0.85.
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