In a simple two-sector economy, households earn ₹1,000 crore and save ₹150 crore. Firms invest ₹150 crore. How much is spent on goods by households and firms together?

Explanation

1. 01

   Household spending = 1,000 − 150 = ₹850 crore.

2. 02

   Add firms' investment spending: 850 + 150 = ₹1,000 crore, equal to income, because saving equals investment.