Question

Ina an economy the equilibrium level of income is 12000 crore the ratio of marginal propensity to save is 3:1 calculate the additional investment needed to reach a new equilibrium level of income 20000 crore

Answer 1

Answer:

Calculate the additional investment needed to reach a new equilibruim level of income of Rs. 20,000 crore. Solution : Ratio of 3:1 between marginal propensity to consume (MPC) and marginal propensity to save (MPS) signifies : MPC =34 or 0.75 and MPS =14 or0.25.

Explanation: