Assuming the following for a hypothetical economy, estimate the Break-even level of Income and Equilibrium level of Income :

(i)

Autonomous Consumption Expenditure ($\displaystyle \bar{c}$) = ₹ $\displaystyle 50$ crore

(ii)

Marginal Propensity to Save (MPS) = $\displaystyle 0$·$\displaystyle 2$

(iii)

Autonomous Investments ($\displaystyle I_0$) = ₹ $\displaystyle 100$ crore

Given, Autonomous Consumption Expenditure ($\displaystyle \bar{c}$) = ₹ $\displaystyle 50$ croreMarginal Propensity to Save (MPS) = $\displaystyle 0.2$Autonomous Investments ($\displaystyle I_0$) = ₹ $\displaystyle 100$ croreMarginal Propensity to Consume (MPC) = $\displaystyle 1$ – MPS= $\displaystyle 1$ - $\displaystyle 0.20$ = $\displaystyle 0.80$As we know, at Break-even level of income; Y = CY = $\displaystyle \bar{c}$ + (MPC) YY = $\displaystyle 50$ + $\displaystyle 0.80$ YY = ₹ $\displaystyle 250$ croreAt equilibrium level of income; Y = C + IY = ($\displaystyle 50$ + 0.80Y) + $\displaystyle 100$Y = ₹ $\displaystyle 750$ croreAlternate SolutionAs we know, at Break-even level of income; S = $\displaystyle 0$S = - $\displaystyle \bar{c}$ + (MPS) Y$\displaystyle 0$ = - $\displaystyle 50$ + $\displaystyle 0.20$ YY = ₹ $\displaystyle 250$ croreAs we know, at equilibrium; S = I-$\displaystyle 50$ + $\displaystyle 0.20$ Y = $\displaystyle 100$Y = ₹ $\displaystyle 750$ crore