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In an economy if equilibrium level of national is Rs. 2000 crores, Autonomous consumption = Rs. 400 crores and Investment expenditure = Rs. 200 crores, then MPC will be:

Solution

Correct Option: 4

At equilibrium, Y = C + I. So 2000 = (400 + MPC times 2000) + 200. This gives 2000 - 600 = 2000 times MPC, so MPC = 1400/2000 = 0.7.

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