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What's the right answer?? Pls solve and show it. Class 12 macroeconomics |
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Answer» 1050 is the correct answer for your QUESTION EXPLANATION:The consumption function is C= 75+0.75 Y where Y is the income at different level in the economy. Income = consumption + SAVINGS => Savings = Income - consumption => S = Y- C=> S = Y - ( 75 + 0.75 Y)=> S = Y- 75 - 0.75 Y=> S = - 75 + Y ( 1 - 0.75) => S = -75 + 0.25 Y Therefore, the saving function is S= -75 + 0.25 Y where autonomous savings= -75 crores, MPS= 0.25 and Y is income at all levels. At EQUILIBRIUM level of output, AS=ADY= C+I => Y= 75+ 0.75 Y + 100 => Y - 0.75 Y = 75+ 100=> 0.25 Y = 175=> Y = 175/ 0.25 = 700 croresAt equilibrium level of Income, consumption expenditure is Savings = Investment = 100 crores |
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