Question

if in an economy,saving function is given by S= (-50)+0.2Y and Y = 2000 crores; consumption expenditure for the economy would be 1650 crores,and the autonomous investment is 50 crore and the marginal prosperity to consume is 0.8.true or false?justify your answer with proper calculations.​

Answer 1

Answer:

S= -C‘+MPS*Y

Therefore ,MPS=0.2

Now,MPC=1-MPS=1-0.2=0.8

C=C’+mY(where m is MPC)

C=50+0.8*2000=1650 crores

S=-50+0.2*2000=350 crores

At equilibrium, S=I

therefore, autonomous investment =350 crores

Hence, all the given values are correct  autonomous investment

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