Measure the level of ex-ante aggregate demand when autonomous investment and consumption expenditure A is Rs 50 crores, and MPS is 0 . 2 and level of income Y is Rs 4000 crores. State whether the economy is in equilibrium or not (cite reasons).

Equilibrium Income Y = Rs 4000 crore Autonomous Investment Autonomous Consumption A ¯ = Rs 50 crore MPS = 0 . 2 So, MPC b = 1 - 0 . 2 = 0 . 8 ( MPC = 1 - MPS ) AD = C + 1 AD = C ¯ + bY + 1 = A ¯ + bY = 50 + 0 . 8 Y ( A = C ¯ + I ¯ ) As we know, the equilibrium level of national income in the two-sector model is determined where, AS = AD Y = 50 + 0 . 8 Y 4000 = 50 + 0 . 8 ( 4000 ) 4000 = 50 + 3200 4000 is not equal to 3250 Hence, the economy is not in equilibrium.

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If in an economy: (a) Consumption function is given by C = $100 + 0.75 Y$ , and (b) Autonomous Investment is Rs. $150$ crores. Estimate Consumption and Savings at the Equilibrium Level of Income.

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If in an economy: (a) Consumption function is given by C = 100 + 0.75Y, and (b) Autonomous Investment is Rs. 150 crores. Estimate Consumption and Savings at the Equilibrium Level of Income.

Important Questions on Determination of Income and Employment

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If in an economy: (a) Consumption function is given by C = $100 + 0.75 Y$ , and (b) Autonomous Investment is Rs. $150$ crores. Estimate Consumption and Savings at the Equilibrium Level of Income.