(a) Explain Keynes’ psychological law of consumption. What are the determinants of
propensity to consume?
(b) Explain the working of multiplier. Calculate the value of multiplier and change in
income when change in investment in the economy is ₹ 100 crore and the MPC is 0.8.
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l me
Explanation:
In economics, the marginal propensity to consume is a metric that quantifies induced consumption, the concept that the increase in personal consumer spending occurs with an increase in disposable income. The proportion of disposable income which individuals spend on consumption is known as propensity to consume.
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