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Question
An Economy is in equilibrium, calculate the Marginal Propensity to Save (MPS) from the following:
- National Income (Y) = ₹ 4,400
- Autonomous Consumption `bar("C")` = ₹ 1,000
- Investment Expenditure (I) = ₹ 70
Solution
MPS = ?
Y = ₹ 4400
`bar("C")` = ₹ 1000
I = ₹ 70
Y = C + I
₹ 4400 = C + ₹ 70
C = ₹ 4330
C = `bar("C") + "bY"`
4330 = 1000 + b(4400)
(4330 - 1000) = 4400b
`3330/4400` = b
(MPC) b = 0.76
MPS = 1 - MPC
= 1 - 0.76
= 0.24
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