Advertisements
Advertisements
Question
In an economy, S = −100 + 0.6 Y is the saving function, where S is Saving and Y is National Income. If investment expenditure is 1,100, calculate:
(1) Equilibrium level of National Income
(2) Consumption expenditure at equilibrium level of National Income.
Solution
We are given, S = -100 + 0.6Y
and, I = 1100
(1) Equilibrium level of National Income
At equilibrium level, AD = AS
or, S = I
Substituting the values of S and I in the formula
-100 + 0.6Y = 1100
or, 0.6Y =100 + 1100
or, 0.6Y =1,200
or, Y =`1200/0.6` =2000
Thus, Equilibrium level of National Income is equal to 2000
(2) Consumption expenditure at equilibrium level of National Income.
We know, at equilibrium level Y =C + S
where, S = -100 + 0.6Y
Substituting the values of National Income at Equilibrium level in the formula
or, 2000 =C +(-100+0.6(2000))
or, C = 2000 - (-10+1200) = 900
Thus, Consumption expenditure at equilibrium level of National Income is equal to 900.
APPEARS IN
RELATED QUESTIONS
Calculate National Income from the following data:
| S.No. | Particulars | Rs.in crores |
| (i) | Private final consumption expenditure | 900 |
| (ii) | Profit | 100 |
| (iii) | Government final consumption expenditure | 400 |
| (iv) | Net indirect taxes | 100 |
| (v) | Gross domestic capital formation | 250 |
| (vi) | Change in stock | 50 |
| (vii) | Net factor income from abroad | (-)40 |
| (viii) | Consumption of fixed capital | 20 |
| (ix) | Net imports | 30 |
Calculation National Income and Personal Disposable Income:
| (Rs crores) | ||
| 1 | Personal tax | 80 |
| 2 | Private final consumption expenditure | 600 |
| 3 | Undistributed profits | 30 |
| 4 | Private income | 650 |
| 5 | Government final consumption expenditure | 100 |
| 6 | Corporate tax | 50 |
| 7 | Net domestic fixed capital formation | 70 |
| 8 | Net indirect tax | 60 |
| 9 | Depreciation | 14 |
| 10 | Change in stocks | (-)10 |
| 11 | Net imports | 20 |
| 12 | Net factor income to abroad | 10 |
Giving reason explain how the following should be treated in the estimation of national income:
Payment of interest by a firm to a bank
Calculate 'Net National Product at Market Price' and 'Personal Income'.
| (Rs crore) | ||
| (i) | Transfer payments by government | 7 |
| (ii) | Government final consumption expenditure | 50 |
| (iii) | Net imports | -10 |
| (iv) | Net domestic fixed capital formation | 60 |
| (v) | Private final consumption expenditure | 300 |
| (vi) | Private income | 280 |
| (vii) | Net factor income to abroad | -5 |
| (viii) | Closing stock | 8 |
| (ix) | Opening stock | 8 |
| (x) | Depreciation | 12 |
| (xi) | Corporate tax | 60 |
| Xii | Retained earnings of corporatio | 20 |
Calculate national income and gross national disposable income from the following:
| (Rs Arab) | ||
| 1 | Net current transfers to abroad | 5 |
| 2 | Government final consumption expenditure | 100 |
| 3 | Net indirect tax | 80 |
| 4 | Private final consumption expenditure | 300 |
| 5 | Consumption of fixed capital | 20 |
| 6 | Gross domestic fixed capital formation | 50 |
| 7 | Net imports | (-)10 |
| 8 | Closing stock | 25 |
| 9 | Opening stock | 25 |
| 10 | Net factor income to abroad | 10 |
How should the following be treated while estimating national income? You must give the reason in support of your answer.
Purchase of taxi by a taxi driver.
State whether the following statement is True or False
Total Revenue = Total quantity x Price.
Define or explain the following concept.
Disposable income.
Define or explain the following concept.
Induced Consumption expenditure.
State whether the following statements are TRUE or FALSE with reason.
National income is a flow concept.
Answer in brief.
Give different definitions of National Income.
Answer the following question:
What is double counting of national income?
Write short note on:
Personal disposable income
The average income of the country is______.
Write the formula for calculating GNP.
Explain briefly NNP at factor cost.
Explain the meaning of non-market activities.
GDPFC = ____________.
What is ‘National Income’?
