Question

in an economy,c=70+0.6y, where c in consumption expenditure,y is national income.If the value of y is Rs.1000 calculate.(1) the value of c and mps (2) find the value of multiplier​

Answer 1

ANSWER :

c = 70 + 0.6y

• c = consumption expenditure
• y = national income
• b = mpc

Given, y = 1000

c = 70 + 0.6 * 1000

c = 70 + 600

c = 670

Hence, consumption expenditure is 670

mpc + mps = 1

0.6 +mps = 1

mps = 1-0.6

mps = 0.4

Multiplier = 1/mps = 1/0.4

Some information :

MPS = Marginal propensity to save

MPC = Marginal propensity to consume