1.

Calculate Investment Expenditure from the following data about an economy which is in equilibrium:National Income = 1,000Marginal Propensity to Save (MPS) = 6.25Autonomous Consumption Expenditure = 200

Answer»

Y = C + I

C = C bar + b(Y)

∴ Y = C bar + b(Y) + I

∴ 1,000 = 200 + (1 - 0.25)1,000 + I

or 1,000 = 200 + 0.75 x 1,000 + I

or 1,000 = 200 + 750 + I

or 1,000 = 950 + I

or I = 1,000 - 950

I = Rs. 50


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