Question

29. In an economy C = 500+0.9Y and I
= Rs 1000 cr. (where C = Consumption
expenditure, Y = National Income and I
= Investmet)
Calculate the following (i) equilibrium
level of income (ii) value of investment
multiplier
(4 Points)​

Answer 1

Answer:

: As given in the examination problem, Equilibrium Income (Y) = Rs 4000 crore Autonomous Investment + Autonomous Consumption (A¯) = Rs 50 crore MPS = 0.2

So, MPC(b) = 1 – 0.2 = 0.8

(MPC = 1 – MPS)

AD = C + I

AD = C¯ + bY + I = A¯ + bY

= 50 +