Question

그
When as a result of increase in income from
1,600 to 2,600 Inuestment increases by 500.
The value of MPC will be equal to 0.4.​

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.