Question

Suppose, an economy is in equilibrium. From following data, calculate investment expenditure in the economy: 

1. National Income (Y) = ₹ 10,000 crore
2. Marginal Propensity to Save (MPS) = 0.2
3. Autonomous Consumption (`barc`) = ₹ 100 crore 

Answer 1

Υ = `barC` + (1 − MPS) Y + I

10,000 = 100 + (1 − 0.2) 10,000 + I

I = 10,000 − 100 − 10,000 + 2,000

I = ₹ 1,900