Saved Bookmarks
| 1. |
Estimate the value of Aggregate Demand in an economy if: (a) Autonomous Investment (I) = 100 Crore. (b) Marginal Propensity to Save = 0.2 (c) Level of Income (Y) = 4,000 crores. (d) Autonomous Consumption Expenditure (c) = 50 Crore |
|
Answer» The Aggregate Demand (AD) function is given as : AD = C + I AD = {C' +b(Y)} + I C' = 50 (Given) b or MPC = 1 – MPS = 1 – 0.2 = 0.8 Substituting the values of c and b in AD function, we get : AD = {50 + 0.8 (4000)} + 100 = Rs. 3,350 crores Aggregate Demand is Rs. 3,350 crores |
|