Question

Suppose an economy is in equilibrium. From the following data, calculate investment expenditure in the economy: 

1. National Income = ₹ 20,000 crore
2. Marginal Propensity to Consume (MPC) = 0.8
3. Autonomous Consumption (`barc`) = ₹ 100 crore. 

Answer 1

Y = `barC` + bY + I

20,000 = 100 + (0.8 × 20,000) + I

I = 20,000 − 100 − 16,000

I = ₹ 3,900