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51.

Calculate MPC from the following date about an economy which is in equilibrium : `{:("National income",=2","000),("Autonompus consumption expenditure ",=200),("Investment expenditure ",=100):}`

Answer» `Y=C+I`
`Y=(barC+by)+I`
` Y=barC+MPC(2,000)+100`
`MPC=(1700)/(2000)=0.85`
since for survival , there has to be autompous consumption , therefore ,`barC` is grater than zero `(barC gt 0). ` According to Keynes , as income increases, it is human tendency to increase consumption `(0ltb)` but increase in consumption is not as much as increase is not as much as increase in income i,e., b is less than 1`(blt1)` .,thus we can show the interrelationship in this this way .
Discussion
52.

in an economy S= -50+0.5 Y is the saving function ( where ,S=saving and Y =National income ) and investment expenditure is Rs. 7,000 calculate the following : (i) Equilibrium level of national income , (ii) consumption expenditure at equilibrium level of national income .

Answer» (i) for equilibrium I=S ( investment = saving )
`7,000=-50+0.05y`
( substituting value of I and S )
`0.5Y = 7,000+50`
` =7,050`
` Y=7,050 xx(10)/(5) =14,100`
for equilibrium Y=C+I
`14,100=C+7,000`
`C=14,100-7,000`
`=7,100`
( consumption expenditure )
Discussion
53.

in an economy , investment expenditure is increaed by Rs. 700 croce and MPC is 0.9 calculate total increase in income and consumption expenditure .

Answer» `K=(1)/(1-MPC)=(1)/(1-0.95)=(1)/(0.1)=(1)/(1//10)=10`
total increase in income
= increase in investment `xx` K
`=700xx10`
= 7,000 crore
total increase in consumptation expenditure
`=0.9 " of " 700 `
`=(9) /(10) " of " 7,000 = 6,300 ` crore
Discussion
54.

in an economy ,MPC is 0.75 if investment expenditure is increased by Rs. 500 Crore , calculate total increase in income and consumption experditure .

Answer» `K=(1)/(1-MPC)=(1)/(1-0.75)=(1)/(0.25)=(1)/(1//4)=4`
total increase in income
= increase in investment `xx` K
`=500xx4`
`Rs. 2,000` crore
total increase in consumption expendityre
`= 0.75 " of" 2,000`
`= 1,500` crore .
Discussion
55.

If an economy , Saving Function is given by S `=(-)50+0.2Y and Y = Rs. 2,000`crores, consumption expenditure for the economy would be Rs. 1,650 crores and the autonomous investment is Rs. 50 crores and the marginal propensity to consume is 0.8 True or False ? Justify your answer with proper calculattions.

Answer» Yes all the given values are correct
`S=-50+0.2Y`
`S=-50+.02(2,000) `
`=-50+400`
` =350` crore
At equilibrium level of income :
`Y=C+S`
`2,000=C+350`
` C=2,000 - 350`
`= 1,650 ` crores
MPC+MPS=1
MPC+0.2=1
MPC=1-0.2
`=0.8`
Discussion
56.

Calculate consumption level for the equation Y= Rs. 1,000 crore if consumption function is C=300+0.5 Y.

Answer» Consumption level `C=300(5)/(10)xx1,000`
`=300+500`
`= Rs, 800` crore
Discussion
57.

define marginal propensity to save (MPS).

Answer» the ratio of change is saving `( Delta S) ` to change in income `(Delta Y)` is called MPS . Sybolically : `MPS=Delta S//DeltaY.`
Discussion
58.

what is investment multiplier

Answer» investment multiplier (K) is the ration is the increase in income `( Delta Y)` due to increase in investment `(Delta I) ` symolically `:K=DeltaY //Detla I.`
Discussion
59.

what is meant by equilibrium level in income ?

Answer» Equilibrium level of income is that level of income where `AD=AS or S=I`.
Discussion
60.

Autonomus increase in investment produces autonomous increase in income .

Answer» Correct Answer - False whereas investment is autonomous , increase in income is induced through increase in expenditure .
Discussion
61.

Choose the correct alternative in the following questions. MPC equals :A. `(C)/(Y)`B. `(Delta C)/(Delta Y)`C. `1-(C)/(Y)`D. `1-(Delta C)/(Delta Y)`

Answer» Correct Answer - B
Discussion
62.

Choose the correct alternative in the following questions. Theory of income determination is based on :A. Ex-ante variablesB. Ex-post variablesC. Both (a) and (b)D. None of the above

Answer» Correct Answer - A
Discussion
63.

Choose the correct alternative in the following questions. Aggregate supply is same as :A. National outputB. National incomeC. Both (a) and (b)D. None of the above

Answer» Correct Answer - C
Discussion
64.

PROPRENSITY TO SAVE

Answer» Propensity to save, in economics, the proportion of total income or of an increase in income that consumers save rather than spend on goods and services.
Discussion