Question

calculate investment if MPC is 0.7 consumption expenditure at zero income is rs 50 and equilibrium income is rs 500​

Answer 1

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An economy is In equilibrium. Calculate the Investment Expenditure from the following:  

National income   = 800

Marginal propensity to save = 0.3

Autonomous Consumption = 100

ANSWER

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