Economy, asked by kharjas68, 3 months ago

Q1 If an additional investment of Rs500cr increases the income of Rs500cr. In the first round of the multiplier process,by Rs450 cr in the second round by 405cr in the third round and so on. Determine the total increase in income.

Q2 Calculate MPC if autonomous consumption is 500cr and ex ante investments are 4000cr and equilibrium level of income is 18000cr.

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Answers

Answered by sangeetseth626
4

Answer:

Total increase in income = Rs 5000 Crore

Explanation:

increase of Rs. 450 crores in the second round and of Rs. 405 crores in the third round indicates that 90% of additional income is spent on consumption, i.e .MPC=0.90.

Multiplier (k) =1/1-MPC= 1/1-0.90 = 1/0.10 =10

We also know: k =Change in Income(ΔY)Change in Investment(Δl)

10=Change in Income(ΔY)500

Change in Income(ΔY) = Rs 5000

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