Calculate Investment Expenditure from the following data about an economy which is in equilibrium:
Calculate Investment Expenditure from the following data about an economy which is in equilibrium:
National Income = 1,000
Marginal Propensity to Save (MPS) = 6.25
Autonomous Consumption Expenditure = 200
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Y = C + I
C = C bar + b(Y)
∴ Y = C bar + b(Y) + I
∴ 1,000 = 200 + (1 - 0.25)1,000 + I
or 1,000 = 200 + 0.75 x 1,000 + I
or 1,000 = 200 + 750 + I
or 1,000 = 950 + I
or I = 1,000 - 950
I = Rs. 50
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Answered
We know that C = c + bY , by putting value
C = 200 + 0.75 x 1000 = 950
We also know that Y = C + I
1000 = 950 + I
∴ I = 50.
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Answered