Calculate the Marginal Propensity to Consume from the following data

CBSE Class 12 CBSE Class 12 Economics
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1

Calculate Marginal Propensity to Consume from the following data about an economy which is in
equilibrium:
National Income = 2000
Autonomous consumption expenditure = 200
Investment expenditure =100

2

Given, Y = 2000 ,$\overline{C}$ = 200,I = 100
We know, Y = C +I, C = $\overline{C}$ +bY
Y = $\overline{C}$ +bY + I

For calculating MPC, we use following equation:
Y= $\overline{C}$ +bY + I
b = MPC
2000 =200 +2000 b +100
b = 2000 - 300 / 2000 = 1700 /2000 = 0.85

Thus, MPC = 0.85