Suppose autonomous investment and consumption expenditure (A) in a hypothetical economy is ₹50 crores, MPS is 0.2 and the level of income is ₹4000 crores. The value of ex-ante aggregate demand would be................

3250

The correct answer is Option (3) → 3250

To calculate the ex-ante aggregate demand (AD), we use the formula: AD=A+ cY

Where:

• A = Autonomous expenditure (investment + autonomous consumption) = ₹50 crores

• Y = Income = ₹4000 crores

• c = Marginal Propensity to Consume (MPC)

MPC=1−MPS = 1−0.2=0.8

AD=50 + 0.8 × 4000= ₹3250 crores