Short Answer Type

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An economy is in equilibrium. From the following data about an economy calculate autonomous consumption.
(i) Income = 5000
(ii) Marginal propensity to save = 0.2
(iii) Investment expenditure = 800


Given that
Income (Y) = 5000
Marginal propensity to save (s) = 0.2
Therefore, marginal propensity to consume = 1 -0.2 =0.8
I= 800
As we know that
Y =C+I
C =Y -1
C = 5000 – 800 = 4200
C= C' - cY
4200 = C' + 0.8(5,000)
C' = 200
Thus, autonomous consumption is 200.

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Long Answer Type

Calculate (a) net domestic product at factor cost and (b) gross national disposable income :

s. no.   in RS
1 Private final consumption expenditure 8000
2 Government final consumption expenditure 1000
3 exports 70
4 imports 120
5 Consumption of fixed capital 60
6 Gross domestic fixed capital formation 500
7 change in stock 100
8 Factor income to abroad 40
9 Factor income from abroad 90 
10 indirect taxes 700
11 subsidies 50
12 Net current transfers to abroad (-)30
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Or
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(a) Profits earned by branches of country’s bank in other countries
(b) Gifts given by an employer to his employees on independence day
(c) Purchase of goods by foreign tourists

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Short Answer Type

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