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Question
An economy is in equilibrium. Calculate the National Income from the following :
Autonomous Consumption = 120
Marginal Propensity to Save = 0.2
Investment Expenditure = 150
Solution
Given that
`barC = 120`
MPS(s) = 0.2
i.e MPC(c) = 1- MPS = 1 - 0.2 = 0.8
I = 150
We knoiw that
Y = C + I
`Y = barC + MPC(Y ) + I`
`Y = 120 + 0.8Y + 150`
0.2Y = 270
Y = 1350
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