Question

Estimate the value of Aggregate Demand in an economy if:

a) Autonomous Investment (I) = 100 Crore.

b) Marginal Propensity to Save = 0.2

c) Level of Income (Y) = 4,000 crores.

d) Autonomous Consumption Expenditure (c) = 50 Crore

Answer 1

Hey mate ✌️✌️

Estimate the value of Aggregate Demand in an economy if: Level of Income (Y) = 4,000 crores.


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Answer 2

Formula required:

Aggregate Demand (AD) = Consumption Expenditure (C) +  Investment (I)

AD = [C" + b * Y]  + I  

Given details:

C" = 50 Crores

Investment (I) =  100 Crores.

Income level (Y) =4000 Crores.

Marginal Propensity to Save (MPS) = 0.2

b = 1 - MPS = 1 - 0.2 = 0.8

So,

AD = 50 + (0.8 *4000) + 100

AD = 3350

Answer:

Aggregate Demand = 3350 Crores.