If Marginal Propensity to Consume is 0.9, what is the value of multiplier? How much investment is needed to increase National Income by ₹ 5,000 crore? Calculate.
Download our app for free and get started
Here, $\Delta\text{Y}=₹ \ 5,000 \text{ crore}$$\text{MPC}=0.9$
$\text{K}=\frac{1}{1-\text{MPC}}=\frac{1}{1-0.9}$
$=\frac{1}{0.1}=10$
Again, we know that, $\text{K}=\frac{\Delta\text{Y}}{\Delta\text{I}}$$10=\frac{5,000}{\Delta\text{I}}$
$\therefore\Delta\text{I}=\frac{5,000}{10}=₹ \ 500\text{ crore}$
$\text{K}=\frac{1}{1-\text{MPC}}=\frac{1}{1-0.9}$
$=\frac{1}{0.1}=10$
Again, we know that, $\text{K}=\frac{\Delta\text{Y}}{\Delta\text{I}}$$10=\frac{5,000}{\Delta\text{I}}$
$\therefore\Delta\text{I}=\frac{5,000}{10}=₹ \ 500\text{ crore}$
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 SolutionDifferentiate between full employment and underemployment equilibrium.
- 2View SolutionExplain the national income determination in an economy using saving and investment approach. Use diagram.
- 3View SolutionAn economy is in equilibrium. From the following data calculate investment expenditure:
- Marginal propensity to consume = 0·9
- Autonomous consumption = 200
- Level of income = 10000
- 4View SolutionCalculate investment expenditure from the following data about an economy which is in equilibrium:
National Income = ₹ 1,000 Marginal Propensity to Save = 0.20 Autonomous consumption expenditure = ₹ 100 - 5View SolutionTax rates on higher income group have been increased. Which economic value does it reflect? Explain.
- 6View SolutionWhat is meant by aggregate demand? State its components.
- 7View SolutionAn economy is in equilibrium. From the following data calculate autonomous consumption.
- Income = 10000
- Marginal propensity to save = 0.2
- Investment = 1500
- 8View SolutionCalculate autonomous consumption expenditure from the following data about an economy which is in equilibrium.National income= 1200Marginal propensity to save= 0.20Investment expenditure= 100
- 9View SolutionExplain the working of investment multiplier with the help of an example.
- 10View SolutionExplain the relationship between marginal propensity to consume and investment multiplier.