If at equilibrium level nation income is rs.2000 crores. Autonomous consumption is rs. 400 crores and investment expenditure is rs.200crore then marginal property to consume will be?
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Consumption Function is C = 400+ b Y where Y in the income in the economy and b= marginal propensity to consume.
At equilibrium level of output,
AS=AD
Y= C+I
=> 2,000 = 400 + b (2,000) + 200
=> 2,000 = 600+ 2,000 b
=> 2,000 b = 2,000 - 600
=> b = 1,400/ 2,000 = 0.7.
Hope u got it
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