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CBSE 2019 Class 12 Economics Delhi Set 3

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Question : 1 of 4
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SECTION-B
(Macro-economics)
If in an economy :
Change in initial Investment (ΔI)=₹ 1,200(\Delta I)=\text{₹}\,1,200 crores
Marginal Propensity to Save (MPS) =0.2=0.2
Find the values of :
(a) Investment Multiplier (k)
(b) Change in final income (ΔY)(\Delta Y)
Solution:  
Change in initial investment (ΔI)=₹1200(\Delta I)=\text{₹}1200 crores Marginal propensity to save (MPS) =0.2=0.2
(a) Investment multiplier (k) =  1MPS=  10.2=5=\;\frac{1}{\text{MPS}}=\;\frac{1}{0.2}=5
(b) Change in final income (ΔY)=(\Delta Y)= ?
K  =  ΔYΔIK\;=\;\frac{\Delta Y}{\Delta I}
ΔY  =K×ΔI\Delta Y\;= K \times \Delta I
  =5×1200=₹6000   crores   \; = 5 \times 1200 = \text{₹}6000 \; \text{ crores } \;
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