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CBSE 2019 Class 12 Economics Outside Delhi Set 1

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Question : 6 of 24
Marks: +1, -0
Calculate change in final income, if Marginal Propensity to Consume (MPC) is 0.8 and change in initial investment is ₹1,000\text{₹}1{,}000 crores.
Solution:  
MPC =0.8=0.8 and change in initial investment =₹=\text{₹} 1000 crores
   Multiplier     =  11−MPC=  11−0.8=5\;\text{ Multiplier }\;\;=\;\frac{1}{1-MPC}=\;\frac{1}{1-0.8}=5
K  =   Change in income  Change in investment   (ΔY)(ΔI)K\;=\;\frac{ \text{ Change in income } }{ \text{ Change in investment } } \; \frac{ (\Delta Y) }{ (\Delta I) }
5  =   Change in income   (ΔY)10005\;=\;\frac{ \text{ Change in income } \; (\Delta Y) }{ 1000 }
Change in income =₹5000=\text{₹} 5000 crores.
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