Check sibling questions

Calculate Change in Income (ΔY) for a hypothetical economy. Given that:

a) Marginal Propensity to Consume (MPC) = 0.8, and

b) Change in Investment (ΔI)      = ₹1,000 crores

(2 Marks)


Given Δ I = ₹1,000 crores

MPC = 0.8

As we know,

Multiplier (K) = (1/1-MPC)

K= (1/1-0.8)

K= (1/ 0.2)

K= 5 times      

We know K = ΔF/ Δ I

5 = 𝛥 F/1000

ΔY = ₹ 5,000 crores

Learn in your speed, with individual attention - Teachoo Maths 1-on-1 Class



Ask a doubt
Maninder Singh's photo - Co-founder, Teachoo

Made by

Maninder Singh

CA Maninder Singh is a Chartered Accountant for the past 13 years and a teacher from the past 17 years. He teaches Science, Economics, Accounting and English at Teachoo