Question : The saving function of an economy is given as S= -40+0.40Y. If the planned investment is Rs. 250 crore. Calculate aggregate demand at income of Rs. 400 crore.
Option 1: 650
Option 2: 600
Option 3: 725
Option 4: 800
Answer (1)
24th Jan, 2024
Correct Answer: 725
Solution : S= -40+0.40Y
C= 40+0.60Y
I= 250
AD= C+I
Y= 40+0.60Y+250
0.40Y= 290
Y= 725 crore
Hence, Option C is correct.
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