The value of additional investment made by the government is ₹ 500.
Advertisements
Advertisements
Question
Find the value of additional investment made by the government when MPC = 0.5 and the increase in income (ΔY) = ₹ 1000.
Numerical
Advertisements
Solution
Given: MPC = 0.5, ΔY = ₹ 1,000
MPC = `(ΔC)/(ΔY)`
`0.5 =(ΔC)/(1,000)`
ΔC = 0.5 × 1000
ΔC = 500
K = `(1)/(1 - "MPC")`
= `(1)/(1 - 0.5)`
= `1/0.5`
= 2
ΔI = `(ΔY)/K`
= `(1000)/(2)`
= 500
shaalaa.com
Is there an error in this question or solution?
APPEARS IN
RELATED QUESTIONS
The value of the multiplier is: (choose the correct alternative)
a. `1/"MPC"`
b. `1/"MPS"`
c. `1/(1-"MPS")`
d. `1/(MPC- 1)`
If MPC = 0, the value of the multiplier is: (Choose the correct alternative)
a. 0
b. 1
c. Between 0 and 1
d. Infinity
Calculate the marginal propensity to consume if the value of multiplier is 4.
Define investment multiplier.
How is the investment multiplier related to marginal propensity to consume?
Explain the relationship between the investment multiplier and marginal propensity to consume.
If in an economy :
Change in initial Investments (∆I) = ₹ 500 crores
Marginal Propensity to Save (MPS) = 0.2
Find the values of the following:
(a) Investment multiplier (k),
(b) Change in final income (∆Y)
Keynesian multiplier establishes a relationship between ______
Keynes derived Investment Multiplier from Kahn’s ______
The value of Keynesian Investment Multiplier depends on ______
The value of multiplier is ______
Which of the following statements is true?
For a hypothetical economy, assuming there is an increase in the marginal Propensity to Consume (MPC) from 75% to 90% and change in investment to be ₹ 1,000 crore.
Using the concept of investment multiplier, calculate the increase in income due to change in Marginal Propensity to Consume (MPC).
For a hypothetical economy, assuming there is an increase in the Marginal Propensity to Consume (MPC) from 80% to 90% and change in investment to be ₹ 1000 crore.
Using the concept of investment multiplier, calculate the increase in income due to change in Marginal Propensity to Consume.
