Class 12 Exam > Class 12 Questions > The value of MPC is 0.6 and initial income in...
Start Learning for Free
The value of MPC is 0.6 and initial income in economy is 100 crore. Prepare a schedule showing income, consumption and saving.Also show equilibrium level of income by assuming autonomous investment of 80 crores.?
Most Upvoted Answer
The value of MPC is 0.6 and initial income in economy is 100 crore. Pr...
Income, Consumption, and Saving Schedule
Given:
- Marginal Propensity to Consume (MPC) = 0.6
- Initial Income = 100 crore
- Autonomous Investment = 80 crore
The consumption function can be expressed as:
- Consumption (C) = Autonomous Consumption + MPC × Income (Y)
Assuming autonomous consumption is 0 for simplicity, the schedule can be prepared as follows:
Equilibrium Level of Income
In equilibrium, total spending (Consumption + Investment) equals total output (Income).
- At equilibrium: C + I = Y
- With I = 80 crore, the equation becomes:
- C + 80 = Y
Using the consumption values calculated above, we can find the equilibrium income:
1. For Y = 160: C = 96, thus 96 + 80 = 176 (not equilibrium)
2. For Y = 140: C = 84, thus 84 + 80 = 164 (not equilibrium)
3. For Y = 180: C = 108, thus 108 + 80 = 188 (not equilibrium)
The equilibrium income occurs when savings equal investment. When savings reach 80 crore, the economy is in equilibrium.
In this scenario, equilibrium income is determined at a level where consumption plus investment equals income, leading to a balance in the economy.
Given:
- Marginal Propensity to Consume (MPC) = 0.6
- Initial Income = 100 crore
- Autonomous Investment = 80 crore
The consumption function can be expressed as:
- Consumption (C) = Autonomous Consumption + MPC × Income (Y)
Assuming autonomous consumption is 0 for simplicity, the schedule can be prepared as follows:
- Income (Y) in Crores: 100, 120, 140, 160, 180
- Consumption (C) in Crores:
- For Y = 100: C = 0.6 × 100 = 60
- For Y = 120: C = 0.6 × 120 = 72
- For Y = 140: C = 0.6 × 140 = 84
- For Y = 160: C = 0.6 × 160 = 96
- For Y = 180: C = 0.6 × 180 = 108 - Saving (S) in Crores:
- For Y = 100: S = Y - C = 100 - 60 = 40
- For Y = 120: S = 120 - 72 = 48
- For Y = 140: S = 140 - 84 = 56
- For Y = 160: S = 160 - 96 = 64
- For Y = 180: S = 180 - 108 = 72
Equilibrium Level of Income
In equilibrium, total spending (Consumption + Investment) equals total output (Income).
- At equilibrium: C + I = Y
- With I = 80 crore, the equation becomes:
- C + 80 = Y
Using the consumption values calculated above, we can find the equilibrium income:
1. For Y = 160: C = 96, thus 96 + 80 = 176 (not equilibrium)
2. For Y = 140: C = 84, thus 84 + 80 = 164 (not equilibrium)
3. For Y = 180: C = 108, thus 108 + 80 = 188 (not equilibrium)
The equilibrium income occurs when savings equal investment. When savings reach 80 crore, the economy is in equilibrium.
In this scenario, equilibrium income is determined at a level where consumption plus investment equals income, leading to a balance in the economy.
Community Answer
The value of MPC is 0.6 and initial income in economy is 100 crore. Pr...
Ans..is 200
|
Explore Courses for Class 12 exam
|
|
Similar Class 12 Doubts
The value of MPC is 0.6 and initial income in economy is 100 crore. Prepare a schedule showing income, consumption and saving.Also show equilibrium level of income by assuming autonomous investment of 80 crores.?
Question Description
The value of MPC is 0.6 and initial income in economy is 100 crore. Prepare a schedule showing income, consumption and saving.Also show equilibrium level of income by assuming autonomous investment of 80 crores.? for Class 12 2024 is part of Class 12 preparation. The Question and answers have been prepared according to the Class 12 exam syllabus. Information about The value of MPC is 0.6 and initial income in economy is 100 crore. Prepare a schedule showing income, consumption and saving.Also show equilibrium level of income by assuming autonomous investment of 80 crores.? covers all topics & solutions for Class 12 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The value of MPC is 0.6 and initial income in economy is 100 crore. Prepare a schedule showing income, consumption and saving.Also show equilibrium level of income by assuming autonomous investment of 80 crores.?.
The value of MPC is 0.6 and initial income in economy is 100 crore. Prepare a schedule showing income, consumption and saving.Also show equilibrium level of income by assuming autonomous investment of 80 crores.? for Class 12 2024 is part of Class 12 preparation. The Question and answers have been prepared according to the Class 12 exam syllabus. Information about The value of MPC is 0.6 and initial income in economy is 100 crore. Prepare a schedule showing income, consumption and saving.Also show equilibrium level of income by assuming autonomous investment of 80 crores.? covers all topics & solutions for Class 12 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for The value of MPC is 0.6 and initial income in economy is 100 crore. Prepare a schedule showing income, consumption and saving.Also show equilibrium level of income by assuming autonomous investment of 80 crores.?.
Solutions for The value of MPC is 0.6 and initial income in economy is 100 crore. Prepare a schedule showing income, consumption and saving.Also show equilibrium level of income by assuming autonomous investment of 80 crores.? in English & in Hindi are available as part of our courses for Class 12.
Download more important topics, notes, lectures and mock test series for Class 12 Exam by signing up for free.
Here you can find the meaning of The value of MPC is 0.6 and initial income in economy is 100 crore. Prepare a schedule showing income, consumption and saving.Also show equilibrium level of income by assuming autonomous investment of 80 crores.? defined & explained in the simplest way possible. Besides giving the explanation of
The value of MPC is 0.6 and initial income in economy is 100 crore. Prepare a schedule showing income, consumption and saving.Also show equilibrium level of income by assuming autonomous investment of 80 crores.?, a detailed solution for The value of MPC is 0.6 and initial income in economy is 100 crore. Prepare a schedule showing income, consumption and saving.Also show equilibrium level of income by assuming autonomous investment of 80 crores.? has been provided alongside types of The value of MPC is 0.6 and initial income in economy is 100 crore. Prepare a schedule showing income, consumption and saving.Also show equilibrium level of income by assuming autonomous investment of 80 crores.? theory, EduRev gives you an
ample number of questions to practice The value of MPC is 0.6 and initial income in economy is 100 crore. Prepare a schedule showing income, consumption and saving.Also show equilibrium level of income by assuming autonomous investment of 80 crores.? tests, examples and also practice Class 12 tests.
|
|
Explore Courses for Class 12 exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
Follow Us
|
Signup to see your scores
go up within 7 days!
Access 1000+ FREE Docs, Videos and Tests
Takes less than 10 seconds to signup