CA Foundation P4 · Chapter 5 · Question 8 of 15
In a two-sector economy, C = 100 + 0.75Y and autonomous investment I = 200 (Rs. crore). Equilibrium national income is:
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Rs. 1,200 crore
Explanation
Equilibrium: Y = C + I = 100 + 0.75Y + 200, so 0.25Y = 300 and Y = 300/0.25 = Rs. 1,200 crore. Check: C = 100 + 0.75 x 1,200 = 1,000; C + I = 1,200. Rs. 400 crore results from dividing autonomous spending by the MPC (300/0.75) instead of the MPS.
More Determination of National Income MCQs
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