Calculating National Income using MPC and Autonomous Consumption

Autonomous Consumption
- Autonomous consumption refers to the minimum level of consumption that occurs even when income is zero.
- It is the consumption that is independent of income and is determined by factors such as basic needs, habits, and social customs.
- In this case, the autonomous consumption is given as 200 crore.

Marginal Propensity to Consume
- Marginal Propensity to Consume (MPC) refers to the proportion of additional income that is spent on consumption.
- In other words, it is the change in consumption that occurs due to a change in income.
- MPC is expressed as a fraction or percentage, and in this case, it is given as 0.70.

Investment
- Investment refers to the amount of money spent on capital goods such as machinery, equipment, and buildings.
- It is a component of national income and is included in the calculation of Gross Domestic Product (GDP).
- In this case, the investment is given as 700 crore.

Calculating National Income
- The formula for calculating national income is given as: Y = C + I + G + NX, where Y is the national income, C is consumption, I is investment, G is government spending, and NX is net exports.
- In this case, we are assuming that government spending and net exports are zero, so the formula simplifies to: Y = C + I.
- We can calculate consumption using the formula: C = Autonomous Consumption + (MPC x Income).
- We know that the autonomous consumption is 200 crore and the MPC is 0.70, so we can substitute those values into the formula: C = 200 + (0.70 x Income).
- We also know that the investment is 700 crore, so we can substitute that into the formula: Y = 200 + (0.70 x Income) + 700.
- Simplifying the formula, we get: Y = 900 + (0.70 x Income).
- To solve for income, we can rearrange the formula: Income = (Y - 900) / 0.70.
- Substituting Y = 1600 (assuming a round number for national income), we get: Income = (1600 - 900) / 0.70 = 1000 crore.
- Therefore, the national income is 1000 crore.

Conclusion
- National income can be calculated using the formula Y = C + I + G + NX.
- Autonomous consumption, marginal propensity to consume, and investment are important components of national income.
- By using the formula C = Autonomous Consumption + (MPC x Income) and simplifying the national income formula, we can calculate the national income.