Question

Calculate Marginal Propensity to Consume from the following data about an economy which is in equilibrium :

National income = 2000, Autonomous consumption expenditure = 200, Investment expenditure = 100

Answer 1

Y = C + I by putting the value we get

2000 = C + 100 , C = 2000 -100 = 1900

C = c + by

1900 = 200 + b 2000

1900 -200 /2000 = b = 0.8

∴ MPC = 0.8