The saving at different levels of income are given in the following schedule:
`{:("Income"(Rs."crores"),0,200,400,600,800,1000),("Saving"(Rs."crores"),-120,-60,0,60,120,180):}`
On the basis of the given schedule, answer the following question:
("i) Calculate MPC at diffferent levels of income.
(ii) If investment is Rs. 120 crores, determine the equilibrium level of income.
(iii) Derive the Consumption and Saving function .
(iv) What is the break- even level of Income.

Explanation

("i)

(ii) Equilibruim level of income is determined when Ad = AS Both are equal at income of Rs. `800 Crores (AD =C+l =680 + 120 = 800` and AS = C+S = 680 + 120= 800).
(iii)Consumption Function is expressed as : C `overline c+ ` b (Y)
MPC or `=0.70`
Given : Autonomous Consumption `overline((c))= Rs. 120` crores
Putting the values of b and `overline c` in the consumption function, we get:
C`=120+ 0.7` (Y)
Saving Function is expressed as : S`=-overlinec+Y(1-b)`
MPS or `1-b=030` [:'MPS= 1- MPC]
Given: Autonomous Consumption `overline ((c))= Rs. 120` crores
Putting the values of 1 - b and `overline c` in the saving function, we get:
S `=120 + 0.3`(Y)
(iv) The break - even level of Income is Rs. 400 Crores as at this income level, consumption is also Rs. 400 Crores.