In an Economy, total savings are Rs. 2000 crores and the ratio of average propensity to save and average propensity to consume is 2 : 7. Calculate the level of income in the economy?
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 9000 crores.
We are given:
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Total Savings (S) = Rs. 2000 crores
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APS : APC = 2 : 7
We know: APS + APC=1
Let APS = 2x and APC = 7x, then: 2x + 7x = 1
⇒x= 1/ 9
So:
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APS = 2x = 2/9
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APC = 7x = 7/9
We Know APS= S /Y
2/9 =2000/Y
Y = (2000*9) / 2
Y =9,000