<p>I think you use the inverse (1-MPC) of the MPC to derive the marginal propensity to save (MPS) and create the investment function.  So, I= 60 + .2*1000 = 260, or an additional 200 from the autonomous level.  </p>

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2020-01-20T21:43:59.093Z
2020-01-20T21:43:59.093Z
Danny Coveney
<p>I recently encountered upon this question:</p>

<p>Suppose, in  an economy,autonomous consumption is Rs 100 crore and autonomous investment is Rs 60 crore. Imagine that in this economy,with every increase in income 80 °/° of it is spent on consumption .  If the full employment level of income is Rs 1000 crore,what will be the additional investment?  </p>

<p>So, the MPC is 0.8 and so the multiplier would be 5 times. 
The consumption function is C =  Autonomous consumption + MPC.y
Hence, C = 100 + (0.8)1000 = 900 crore.
But then given that the multiplier is the ratio  change in income to change in investment, how to proceed further?</p>

<macroeconomics><national-income>
What will be the additional investment?
Kkk
# What will be the additional investment?

(Asked by: username_0 on 2020-01-14)

I recently encountered upon this question:

Suppose, in an economy,autonomous consumption is Rs 100 crore and autonomous investment is Rs 60 crore. Imagine that in this economy,with every increase in income 80 °/° of it is spent on consumption . If the full employment level of income is Rs 1000 crore,what will be the additional investment?

So, the MPC is 0.8 and so the multiplier would be 5 times.
The consumption function is C = Autonomous consumption + MPC.y
Hence, C = 100 + (0.8)1000 = 900 crore.
But then given that the multiplier is the ratio change in income to change in investment, how to proceed further?

**Tags:** macroeconomics, national-income

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## 1 answers

### Answer by username_1 on 2020-01-20. Score: 0

I think you use the inverse (1-MPC) of the MPC to derive the marginal propensity to save (MPS) and create the investment function. So, I= 60 + .2\*1000 = 260, or an additional 200 from the autonomous level.


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