CBSE 2018 Class 12 Economics Exam

Question : 10 of 16

Marks: +1, -0

The value of marginal propensity to consume is 0.6 and initial income in the economy is ₹ 100 crores. Prepare a schedule showing Income, Consumption and Saving. Also show the equilibrium level of income by assuming autonomous investment of

\₹ 80

crores.

Solution:

Given that,
Marginal propensity to consume

( {\MPC})=0.6

Initial income

=\₹ 100

crores
Autonomous investment

=\₹ 80

crores

\;C=\ov{C}+c(Y)

\;C=0+0.6(Y)

Income(₹)	Consumption	Saving (₹) $(1- {\MPC}= {\MPS}) {\MPS}=0.40$	Investment
100	60	40	80
200	120	80	80
300	180	120	80
400	240	160	80
500	300	200	80

Aggregate Demand

( {\AD})=

Aggregate Supply (AS)

{\AD}= {\C}+ {\I} \;\text " and "\; {\AS}= {\C}+ {\S}

Therefore, the equilibrium level of income is ₹ 200 crores.

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