CBSE 2020 Class 12 Economics Delhi Set 1

Question : 8

Total: 46

If Marginal Propensity to Save (MPS) is 0.25 and initial change in investment is ₹250 crores, then the final change in income would be ........... .
(Choose the correct alternative).

₹1,000 crores
₹ 1,200 crores
₹ 500 crores
₹ 3,500 crores

Solution:

MPS =0.25
Change in investment ∆I=₹250 crore
Final change in income ∆Y= ?
K‌=‌

∆Y

∆I

K‌=‌

mps

‌=‌

0.25

K‌=4
∆Y‌=K×∆I
‌=4×250‌ crores ‌
∆Y‌=1,000‌ crores ‌
Change in income ∆Y=1,000 crores
(a) ₹1,000 crores

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