As a result of increase in investment by ₹ 125 crore national income increases by ₹ 500 crore. Calculate marginal propensity to consume.
Download our app for free and get started
$\text{Multiplier k}=\frac{\text{Change in Income}(\Delta\text{Y})}{\text{Change in Investment}(\Delta\text{I})}=\frac{500}{125}=4$$=\frac{1}{1-\text{MPC}}\ \text{or}\ =\frac{1}{1-\text{MPC}}$
$4-4\text{MPC}=1\ \text{or}\ \text{MPC}=\frac{3}{4}=0.75$
$4-4\text{MPC}=1\ \text{or}\ \text{MPC}=\frac{3}{4}=0.75$
Download our appand get started for free
Experience the future of education. Simply download our apps or reach out to us for more information. Let's shape the future of learning together!No signup needed.*
Similar Questions
- 1View SolutionAn economy is in equilibrium. Calculate the Investment Expenditure from the following:
National Income = 800
Marginal Propensity to Save = 0·3
Autonomous Consumption = 100 - 2View SolutionDistinguish between average propensity to consume and average propensity to save. What is the relation between the two?
- 3View SolutionAn economy is in equilibrium. From the following data about an economy, calculate investment expenditure:
- Income = 10000
- Marginal propensity to consume = 0.9
- Autonomous consumption = 100
- 4View SolutionDefine full employment in an economy. Discuss the situation when aggregate demand is more than aggregate supply at full employment income level.
- 5View SolutionDifferentiate between APC and MPC.
- 6View SolutionAn economy is in equilibrium. From the following data, calculate the marginal propensity to save:
- Income = 10,000
- Autonomous consumption = 500
- Consumption expenditure = 8,000
- 7View SolutionExplain the determination of equilibrium level of income using AD = AS approach.
OR
Explain with the help of a diagram, how aggregate demand and aggregate supply determine the equilibrium level of income. - 8View SolutionThe saving curve of an economy makes a negative intercept of ₹ 20 crore and 10% of additional income is saved. Derive the saving and cunsumtions function.
- 9View SolutionIn an economy, C = ₹ 300 + 0.5Y and I = 3600 (where, C = Consumption, Y = Income, 1 = Investment). Calculate the following:
- Equilibrium level of income.
- Consumption expenditure at equilibrium income.
- 10View SolutionDefine investment multiplier. Explain the relationship between marginal propensity to save and investment multiplier.