Calculate change in final income, if Marginal Propensity to ...

CBSE 2019 Class 12 Economics Outside Delhi Set 1

Question : 6 of 24

Marks: +1, -0

Calculate change in final income, if Marginal Propensity to Consume (MPC) is 0.8 and change in initial investment is

\₹ 1,000

crores.

Solution:

MPC

=0.8

and change in initial investment

=\₹

1000 crores

\;\text " Multiplier "\;\;=\;{1}/{1- {\MPC}}=\;{1}/{1-0.8}=5

{\K}\;=\;{\;\text " Change in income "\;}/{\;\text " Change in investment "\;} \;{(∆ {\Y})}/{(∆ {\I})}

5\;=\;{\;\text " Change in income "\;(∆ {\Y})}/{1000}

Change in income

=\₹ 5000

crores.

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