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In an economy the marginal propensity …

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In an economy the marginal propensity to save is 0.25 investment increase by 200 crore. Calculate the total increase in income and consumption expenditure

    • Posted by Saras Ranjan 3 years, 8 months ago

    CBSE > Class 12 > Economics
    • 1 answers

    Preeti Dabral 3 years, 8 months ago

    If the MPS= 0.25 and investment is increased by Rs. 200 crores.
    Multiplier(k) => Change in Income / 200 = 1/ MPS
    => Change in Income / 200 = 1/0.25
    => Change in Income / 200 = 4
    =>Change in Income = 4*200 = 800 crores
    Consumption at equilibrium level of income,
    Income= Consumption+ Investment
    => Y= C+I
    => C= Y-I
    => C = 800-200
    = 600 crores

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