Question

Q.21 The value of marginal propensity to consume is 0.6 and initial income in the economy is ₹ 100 crores . prepare a schedule showing Income , consumption and saving . Also show the equilibrium level of income by assuming autonomous investment of ₹ 80 crores

Answer 1

$0.6 \div 100 =$

Answer 2

Given:

Marginal propensity to consume (MPC) = 0.6

Initial income = 100

Autonomous investment = 80

Thus, with above given information,

$C=\overline{C}+c(Y)$

$C=\overline{C}+0.6(Y)$

Consumption is the action of using or wasting the money in various resources.

Schedule of Income, Consumption, Savings and Investment are given below.

Aggregate supply = Aggregate demand

Where,  

Aggregate supply = AS, Aggregate demand = AD.

AD = C+1 Whereas, AS = C+S

Therefore, the level of equilibrium income by assuming autonomous investment of Rs. 80 crores is Rs. 200 crores.