Suppose, following data is presented, for an imaginary economy:

Autonomous Consumption = ₹100 crore

Marginal Propensity to Consume = 0.6

Investment = ₹200 crore.

Identify which of the following is the correct value of national income?

₹750 crore

The correct answer is Option (1) → ₹750 crore

To find the correct value of national income, we can use the Keynesian model's equilibrium condition where National Income (Y) equals Aggregate Demand (AD). In a simple economy with autonomous consumption, induced consumption, and investment, the aggregate demand is given by:

AD = C + I

Where:

C = Consumption

I = Investment

The consumption function is given by:

C = Autonomous Consumption + (Marginal Propensity to Consume * Y)