With the help of saving function S = -50 + 0.2(Y) calculate consumption expenditure at the income level of ₹ 5,000 crore.
Download our app for free and get started
We know, saving function is expressed as $\text{S}=-\bar{\text{C}}+(1+\text{b})\text{Y},$
It means: -50 indicates that autonomous consumption $(\bar{\text{C}})=₹\ 50$ crore,
(Assuming value of C in ₹ crore) 0.2 indicates (1 - b), i.e. MPS = 0.2.
We know,
Consumption function is given as; $\text{C}=\bar{\text{C}}+\text{bY},\text{MPC}$ or b = 1 - MPS = 1 - 0.2 = 0.8
Income or Y = ₹ 5,000 crore,
Putting the values of $\text{b},\bar{\text{C}}$ and Y in the consumption function, we get: C
= 50 + 0.8 × 5,000 = ₹ 4050 crore Consumption expenditure (C) = ₹ 4050 crore.
It means: -50 indicates that autonomous consumption $(\bar{\text{C}})=₹\ 50$ crore,
(Assuming value of C in ₹ crore) 0.2 indicates (1 - b), i.e. MPS = 0.2.
We know,
Consumption function is given as; $\text{C}=\bar{\text{C}}+\text{bY},\text{MPC}$ or b = 1 - MPS = 1 - 0.2 = 0.8
Income or Y = ₹ 5,000 crore,
Putting the values of $\text{b},\bar{\text{C}}$ and Y in the consumption function, we get: C
= 50 + 0.8 × 5,000 = ₹ 4050 crore Consumption expenditure (C) = ₹ 4050 crore.
Download our appand get started for free
Experience the future of education. Simply download our apps or reach out to us for more information. Let's shape the future of learning together!No signup needed.*
Similar Questions
- 1View SolutionWhat are impacts or effects of excess demand on price, output, employment?
- 2View SolutionCalculate Autonomous Consumption Expenditure from the following data about an economy which is in equilibrium:National income = 500
Marginal propensity to save = 0.30
Investment expenditure = 100 - 3View SolutionAn economy is in equilibrium. Find 'autonomous consumption' from the following:
National Income = 1,000 Marginal Propensity to consume = 0.8 investment expenditure = 100 - 4View SolutionExplain the meaning of inflationary gap. Explain any two measures of correcting it.
OR
Explain and graphically represent the concept of inflationary gap. Explain any one measure of removing this gap. - 5View SolutionExplain the national income determination in an economy using saving and investment approach. Use diagram.
- 6View SolutionWhat do you understand by 'parametric shift of a line'? How does a line shift when its:
- Slope decreases,
- Its intercept decreases?
- 7View SolutionCalculate investment expenditure from the following data about an economy which is in equilibrium:
National Income = ₹ 1,000 Marginal Propensity to Save = 0.20 Autonomous consumption expenditure = ₹ 100 - 8View SolutionDefine full employment in an economy. Discuss the situation when aggregate demand is more than aggregate supply at full employment income level.
- 9View SolutionThe break-even level of income for an economy is given to be ₹ 5000 crore. If the economy saves 50 percent of additional income, calculate the value of autonomous consumption.
- 10View SolutionIn an economy every time the income rises 20 percent of it is saved. Now suppose in the same economy investment rises by ₹ 200 crore. Calculate the following:
- Change in income.
- Change in consumption.