Question

Find national income from the following: Autonomous consumption = 100 Marginal propensity to consume = 0.80 Investment = _______________.

Answer 1

If consumption Function is C = 100+ 0.80 Y where Y in the income in the economy.

At equilibrium level of income,

AS=AD

Y= C+I

=> Y= 100 + 0.80 Y + 50

=> Y - 0.80 Y = 100 + 50

=> 0.20 Y = 150

=> Y = 150/ 0.20 = 750.