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Question
An economy is in equilibrium. Calculate the Marginal Propensity to Save from the following:
National Income = 1000
Autonomous Consumption = 100
Investment = 120
Solution
Given that
National Income (Y) = 1000
Autonomous consumption = 100
Investment = 120
We know that
Y = C + I
`Y = barC + MPC(Y) + I`
Therefore,
1000 = 100 + MPC x 1000 + 120
MPC = 0.78
Marginal Propensity to Save =(1 - Marginal Propensity to Consume)
= (1 - 0.78) = 0.22
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RELATED QUESTIONS
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Complete the following table:
|
Consumption expenditure (Rs) |
Savings (Rs) |
Income (Rs) |
Marginal propensity to Consume |
|
100 |
50 |
150 |
|
|
175 |
75 |
……. |
…… |
|
250 |
100 |
……. |
…… |
|
325 |
125 |
……. |
…… |
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Explain the development and non-development expenditures of government .
Distinguish between :
Propensity to consume and Propensity to save.
Give reasons or explain the following statement:
Income which is not saved is consumption.
Distinguish between Average propensity to consume and Marginal propensity to consume.
Suppose in a hypothetical economy, the income rises from ₹ 5,000 crores to ₹ 6,000 crores. As a result, the consumption expenditure rises from ₹ 4,000 crores to ₹ 4,600 crores. Marginal propensity to consume in such a case would be __________.
The consumption function of an economy is : C = 40 + 0.8 Y (amount in ₹ crores). Determine that level of income where the average propensity to consume will be one.
The value of MPC is ______
The relation between consumption and savings are ______
A consumer spending on the purchase of goods regardless of the income in possession is an example of _______ consumption.
Marginal Propensity to Save is equal to ______
If MPC is 0.9, what is the value of the multiplier? How much investment is needed to increase national income by Rs 5,000 Crores
What is "MPS" or the 'marginal propensity' to save?
The rate of increase in ______ due to a unit increment in income is called marginal propensity to consume.
'Consumption function curve of an involuntary unemployed workers start from some positive level on Y-axis even at zero level of Income'. Justify the given statement.
How is APS obtained from the APC?
