Calculate consumption expenditure from the following data.
Income = 3000
MPC = 0.8
Autonomous Consumption = 200.
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Answer:
If Autonomous consumption 200 and MPC= 0.9, then
Consumption Function, C = 200+ 0.9 Y where Y in the income in the economy.
So at national income 10,000, consumption is
C = 200+ 0.9 ( 10,000)
= 200 + 9,000
= 9,200
At equilibrium,
National income= consumption + investment
=> Investment= Y- C
=> Investment= 10,000-9,200= 800.
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