Question

An economy is in equilibrium. Calculate Marginal Propensity to Consume :

National Income = 1,000

Autonomous Consumption Expenditure = 200

Investment Expenditure = 100

Answer 1

Detailed Answer:

Given,

Y = Rs. 1,000

C = 200

Investment Expenditure = Rs. 100

At equilibrium: Y = C + I

Therefore, 1,000 = C + MPC(Y) + I

=> 1,000 = 200 + MPC 1,000 + 100

MPC = 0.7