Short Answer TypeCalculate 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
Government raises its expenditure on producing public goods. Which economic value does it reflect? Explain.
Long Answer TypeCalculate 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
Computation of National Income:
National Income = Private Final Consumption Expenditure + Government Final Consumption Expenditure - Net Imports + (Net Domestic Capital Formation + Depreciation) - Depreciation - (Indirect Taxes - Subsidies) - Factor Income to Abroad
or, National Income (NNPFC)
= 600 + 100 + (-20) + (110 + 35) - 35 - (120 - 20) -5 = Rs 685
Computation of Gross National Disposable Income:
Gross National Disposable Income = NNPFC + net Indirect Taxes + consumption of fixed capital – net current transfer to abroad
= 685 + (120-20)+ 35 –(-15)
= Rs 835
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.
Outline the steps required to be taken in deriving saving curve from the given consumption curve. Use diagram.
Switch
