Question

If investment increases from 400 to 550 and income increases from 900 to 1,650, the MPS should be 

        Equal to :​

Answer 1

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 in investment = 1/ (1-MPC)

=> 2,000/200 = 1/(1- MPC)

=> 10 - 10 MPC = 1

=> 10 MPC = 9

=> MPC = 0.9.

Explanation:

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