Question:
Suppose in an imaginary economy, autonomous consumption = ₹ 500 crore and marginal propensity to consume = 0.8. The saving function for the economy would be _________ .
Suppose in an imaginary economy, autonomous consumption = ₹ 500 crore and marginal propensity to consume = 0.8. The saving function for the economy would be _________ .
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The saving function can be calculated using \( S = Y - C \), where \(C\) is the consumption function.
Updated On: Jan 31, 2025
- \( 500 + 0.8Y \)
- \( -500 + 0.8Y \)
- \( 500 + 0.2Y \)
- \( -500 + 0.2Y \)
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The Correct Option is D
Solution and Explanation
The consumption function is given as: C = 500 + 0.8Y
The saving function (S) is derived as: S = Y - C
Substituting (C) into the equation: S = Y - (500 + 0.8Y) = -500 + 0.2Y
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