Question

Calculate MPC from the following date about an economy which is in equilibrium :
`{:("National income",=2","000),("Autonompus consumption expenditure ",=200),("Investment expenditure ",=100):}`

Answer 1

`Y=C+I`
`Y=(barC+by)+I`
` Y=barC+MPC(2,000)+100`
`MPC=(1700)/(2000)=0.85`
since for survival , there has to be autompous consumption , therefore ,`barC` is grater than zero `(barC gt 0). ` According to Keynes , as income increases, it is human tendency to increase consumption `(0ltb)` but increase in consumption is not as much as increase is not as much as increase in income i,e., b is less than 1`(blt1)` .,thus we can show the interrelationship in this this way .