Question

Calculate investment expenditure ferm the following data
about an economy which is in equilibrium
National income=700
MPC =0.8
Otonomous expenditure=70​

Answer 1

Explanation:

If MPS= 0.3, then

MPC = 1- MPS = 1- 0.3= 0.7

If Autonomous consumption is Rs. 100 and MPC= 0.7, then

Consumption Function, C = 100+ 0.7 Y where Y in the income in the economy.

So at national income Rs. 800, consumption is

C = 100+ 0.7 ( 800)

= 100 + 560

= 660

At equilibrium,

National income= consumption + investment

=> Investment= Y- C

=> Investment= 800-660= 140