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An economy is in equilibrium. From the following data, calculate the marginal propensity to save: Given the behaviour of marginal product and total product as more and more units of only one input are employed while keeping other inputs as constant. (a) Income = 10,000 (b) Autonomous consumption = 500 (c) Consumption expenditure = 8,000 |
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Answer» `Y=C+I` `Y=overset(-)C+MPC(Y)` `8000=500+MPC(10000)` `MPC=(8000-500)/(10000)=(7500)/(10000)=0.75` `MPS=1-MPC=1-0.75=0.25 or 1//4` |
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