© examsnet.com
Question : 8
Total: 19
If in an economy:
Change in initial investments( ∆ I ) = ₹ 500
Marginal Propensity to Save (MPS)= 0.2
Find the value of the following :
(a) Investment multiplier (k)
(b) Change in final income( ∆ Y )
Change in initial investments
Marginal Propensity to Save (MPS)
Find the value of the following :
(a) Investment multiplier (k)
(b) Change in final income
Solution:
Change in initial investment ( ∆ I ) = ₹ 500
Marginal propensity to save (MPS)= 0.2
(a) Investment multiplier( K ) =
K =
K =
K = 5
(b) Change in final income( ∆ Y )
K =
∆ Y = K × ∆ I
= 5 × 500
= ₹ 2500 crores.
Marginal propensity to save (MPS)
(a) Investment multiplier
(b) Change in final income
© examsnet.com
Go to Question: