If as a result of change in Investment by Rs. 10 Crore, the income in the economy changes by
50 crore, what will be the value of Investment multiplier?
(a) 1/5 (b) 500 (c) 100 (d) 5
Answers
Answered by
3
ANSWER
Marginal Propensity to consume refers to the percentage change in consumption for every one rupee of change in the income. It is the ratio between the change in income and corresponding change in consumption.
Multiplier(k) => Change in income / change ininvestment = 1/ (1-MPC)
=> 1000/200 = 1/(1- MPC)
=> 10 - 10 MPC = 2
=> 10 MPC = 8
=> MPC = 0.8.
Marginal Propensity to consume refers to the percentage change in consumption for every one rupee of change in the income. It is the ratio between the change in income and corresponding change in consumption.
Multiplier(k) => Change in income / change ininvestment = 1/ (1-MPC)
=> 1000/200 = 1/(1- MPC)
=> 10 - 10 MPC = 2
=> 10 MPC = 8
=> MPC = 0.8.
Similar questions