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Question
If MPC is 0.75 and investment increase by ₹ 250 crore, then the income would increase by ______.
Options
₹ 800
₹ 1000
₹ 1200
₹ 1500
MCQ
Fill in the Blanks
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Solution
If MPC is 0.75 and investment increase by ₹ 250 crore, then the income would increase by ₹ 1000.
Explanation:
Here
K = `1/(1 - MPC)`
= `1/(1 - 0.75)`
= `1/0.25`
= 4
ΔY = k × ΔI
Given that the investment increase (ΔI) is ₹ 250 crore
ΔY = 4 × ₹ 250 crore
= ₹ 1000 crore
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