Question

An economy is in equilibrium. Calculate Marginal Propensity to Save from the following :
National Income $=1,000$
Autonomous Consumption $=100$
Investment Expenditure $=200$

Answer 1

Given:
$Y=1,000$
$I=200$
$\overline{C}=100$
We know that at equilibrium,
$Y=C+I$
$Y=\overline{C}+cY+I$
$1,000=100+c\times 1,000+200$
$1,000c=1,000-100-200$
$1,000c=700$
$corMPC=\frac{700}{1,000}=0.7$
Thus, $MPS=1-MPC=1-0.7=0.3$.