if the national income of an economy increases by Rs 1000 crores. As a result the new investment DI becomes 200 crores. Find the value of MPC and cofficient.
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In an economy, Investment increases by Rs. 200 crores. As a result, the total income increases by 1,000 crores. Calculate the MPC. (0.80)
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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.
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