Calculate investment expenditure from the following data about an economy which is in equilibrium:
National income = 1000
Marginal propensity to save = 0.25
Autonomous consumption expenditure = 200
We know,
Y=C+I
or, Y=C+cYd+I ...
where, C=C+Cy
here, C is autonomous consumption expenditure=200
c is marginal propensity to consume=1-mps
As MPS is given 0.25
so, c=1 - 0.25=0.75 and
Y is income = 1000
Thus putting all the values in equation,
1000 = 200+.75*1000+I
Or I = 1000-200+750
Or I =50
Thus investment expenditure is 50.
Outline the steps required to be taken in deriving saving curve from the given consumption curve. Use diagram.
Government raises its expenditure on producing public goods. Which economic value does it reflect? Explain.
Explain national income equilibrium through aggregate demand and aggregate supply. Use diagram. Also explain the changes that take place in an economy when the economy is not in equilibrium.
Calculate national income and gross national disposable income from the following:
(Rs.)
1. Net current transfers to abroad (-) 15
2. Private final consumption expenditure 600
3. Subsidies 20
4. Government final consumption expenditure 100
5. Indirect tax 120
6. Net imports 20
7. Consumption of fixed capital 35
8. Net change in stocks (-10)
9. Net factor income to abroad 5
10. Net domestic capital formation 110
