Question

In an economy, marginal propensity to consume is 0.75.if investment
expenditure is increased by Rs 500 crores, calculate the increase in income and consumption expenditure.​

Answer 1

Answer:

In an economy MPC is 0.75. If investment expenditure increases by र 500 crores, calculate total increase in income and consumption expenditure. Total increase in income = Increase in investment x K = 500 x 4 = 2,000 crores. Total increase in consumption expenditure = 0.75 of 2,000 = 1,500 crores.