Question

If the consumption function in an economy in an economy is C = 50 + 0.5 y, explain the effect of increment in autonomous expenditure by Rs. 50 crore on equilibrium output.​

Answer 1

Answer:

The saving function of an economy is given as: S = - 50 + 0.4 Y. The economy is in equilibrium at the Income level of Rs. 21,500 crores. Calculate: (a) Investment at equilibrium income level; (b) Autonomous consumption; (c) Multiplier. ((a) Rs. 550 crores; (b) Rs. 550 crores; (c) 2.5)