In a two-sector economy, the marginal propensity to consume (MPC) is 0.5 and the investment is autonomous and constant. The current equilibrium income is 1000. If the MPC increases by 0.75, what will be the new equilibrium income?
Added by Purificaci-N S.
Step 1
The equilibrium income (Y) is determined by the formula Y = C + I, where C is consumption and I is investment. Consumption (C) can be further broken down into autonomous consumption (C0, which does not depend on income) and induced consumption, which is a function Show more…
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