Question

Suppose an economy is in equilibrium. From the following data, calculate Investment Expenditure in the economy: 

1. National Income = ₹ 40,000 crore
2. Marginal Propensity to Consume (MPC) = 0.8
3. Autonomous Consumption (`barC`) = ₹ 100 crore 

Answer 1

When the economy is in equilibrium,

AD = AS

C + I = Y

C₀ + by = Y

100 + 0.8 × 40,000 + I = 40,000

32,100 + I = 40,000

I = ₹ 7,900 cr