Measure the level of ex-ante aggregate demand when autonomous investment and consumption expenditure account A is Rs. 50 crore, MPS is 0.2 and level of income (Y) is Rs. 4000 crore. State whether the economy is in equilibrium or not (cite reasons).

Question

Consumption expenditure (A) = Rs 50 CroresMPS = 0.2So, MPC = 1 − MPS= 1 − 0.2= 0.8Y = 4000 CroresWe know that AD = A + c...

Accepted Answer

Consumption expenditure (A) = Rs 50 CroresMPS = 0.2So, MPC = 1 − MPS= 1 − 0.2= 0.8Y = 4000 CroresWe know that AD = A + c...