CBSE 2014 Class 12 Economics Outside Delhi Set-3

Question : 4

Total: 5

Calculate 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

Solution:

Given:
National income, Y=500
‌ MPS ‌=0.30
Investment expenditure, I=100
Marginal propensity to consume, MPC =1− MPS
=1−0.30=0.70
We know that, Y=C+I......AD=AS and AD=CT]
⇒Y‌=C+b(Y)+I ‌.......[QC=C+1]
⇒ ‌500‌=C+0.70(500)+100
C‌=500−350−100
C‌=50

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