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Estimate the value of Aggregate Demand in an economy if: `{:(,"(a)","Autonomous Investment (I)",,=100"crores"),(,"(b)","Marginal Propensity to Save",,=0.2),(,"(c)","Level of Income (Y)",,=4","000"crores"),(,"(d)","Autonomous Consumption Expenditure"(barc),,=50"crores"):}` |
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Answer» Aggregate Demand (AD) function is given as: AD = C + 1 or, AD = {`barc` + b(Y)}+I `" "`(as C= `barc`+ b(Y)) `barc` = 50 (Given) b or MPC = 1-MPS = 1-0.2 = 0.8 Substituting the values of `barc` and b in AD function, we get: AD = {50 + 0.8(4,000)} + 100= ₹ 3,350 crores Aggregate Demand = ₹ 3,350 crores |
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