Question

Suppose an economy is in equilibrium. From the following data, calculate Investment Expenditure in the economy:

1. National Income = ₹ 10,000 crore
2. Marginal Propensity to Save (MPS) = 0.2
3. Autonomous Consumption (`barc`) = ₹ 200 crore 

Answer 1

Y = `barC` + (1 − MPS)Y + I

10,000 = 200 + (1 − 0.2) 10,000 + I

I = 10,000 − 200 − 10,000 + 2,000

I = ₹ 1,800