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NextQ83

Suppose an economy is in equilibrium. From the following data, calculate Investment Expenditure in the economy : (i) National Income = Rs. 20,000 crore (ii) Marginal Propensity to Consume (MPC) = 0.8 (iii) Autonomous Consumption (c̄) = Rs. 100 crore. "With the objective to correct deflation, Reserve Bank of India may decrease Reverse Repo Rate." Discuss the rationale behind the step taken by the Reserve Bank of India (RBI).

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Question 82

If a straight line consumption function makes a positive intercept at the Y-axis, it implies that the Marginal Propensity to Consume ________ and Average Propensity to Consume ________ as the level of income rises. (Fill up the blanks with correct alternative.)

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