Advertisements
Advertisements
Question
Calculate investment expenditure from the following data about an economy which is in equilibrium:
National income = 1000
Marginal propensity to save = 0.25
Autonomous consumption expenditure = 200
Solution
As we know that
Y=C+I
or
`Y=bar C+cYd+I` (i)
`C=bar C+cY`
Given that
`bar C`is autonomous consumption expenditure = 200
c is marginal propensity to consume 1 mps
When mps = 0.25
c=1-0.25=0.75
Income (y) = 1000
Apply all the values in equation (i)
1000=200+0.75x1000+I
I+1000-200+750=50
Thus, investment expenditure is 50.
APPEARS IN
RELATED QUESTIONS
Define marginal propensity to consume
Find equilibrium national income:
Autonomous consumption expenditure = 120
Marginal propensity to consume = 0.9
Investment expenditure = 1100
In an economy an increase in investment by Rs 100 crore led to ‘increase’ in national by Rs 1000 crore. Find marginal propensity to consume.
The value of marginal propensity to consume is 0.6 and initial income in the economy is Rs 100 crores. Prepare a schedule showing Income, Consumption and Saving. Also show the equilibrium level of income by assuming autonomous investment of Rs 80 crores.
An economy is in equilibrium. From the following data about an economy, calculate investment expenditure:
1) Income = 10000
2) Marginal propensity to consume = 0.9
3) Autonomous consumption = 100
An economy is in equilibrium. From the following data calculate autonomous consumption.[4]
(i) Income = 10,000
(ii) Marginal propensity to consume = 0.2
(iii) Autonomous consumption = 1,500
An economy is in equilibrium. Calculate the Investment Expenditure from the following
National Income = 800
Marginal propensity to save = 0.3
Autonomous Consumption = 100
Write explanatory answer:
Explain the subjective and objective factors determining consumption function.
Fill in the blank with appropriate alternatives given in the bracket:
The part of income not spent is________.
Give reason or explain the following statement
Demand for necessary goods is inelastic.
Answer the following question.
What is meant by autonomous consumption? Explain with the help of a diagram.
If in an economy :
Change in initial Investment (∆I) = ₹ 700 crores
Marginal Propensity to Save (MPS) = 0.2
(a) Investment Multiplier (k)
(b) Change in final income (∆Y)
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
If the value of Average Propensity to Consume (APC) is 0.8 and National Income is ₹4,000 crores, the value of savings will be ______.
If in an economy, the value of investment multiplier is 4 and Autonomous Consumption is ₹ 30 Crore, the relevant consumption function would be :
Assertion (A): Saving curve makes a negative intercept on the vertical axis at zero level of income.
Reason (R): Saving function refers to the functional relationship between saving and income.
The value of ______ can be greater than one.
If increase in National Income is equal to increase in Savings, the value of Marginal Propensity to Consume would be ______.
