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An economy is in equilibrium. Calculate national income from the following. Autonomous consumption=100 Marginal propensity to save = 0.2 Investment expenditure=200 |
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Answer» Solution :Given AUTONOMOUS CONSUMPTION `(barC)`=100 MPS(s)=0.2 i.e. MPC (C )=1-MPS=1-0.2=0.8 1=200 y=?? We KNOW that at equilibrium, Y=C-I i.e. Y = `(barC)`+cY+I implies Y=100+0.8Y+200 implies Y=0.8Y+300 implies Y-0.8Y=300 implies0.2Y=300 so, Y=1,500 |
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