Q23 of 30 Page 1

In an economy investment is increased by Rs. 300 crore. If marginal propensity to consume is 2/3, calculate increase in national income.

Given that


MPC= 2/3=0.67


Change in investment (∆I) = Rs. 300 Cr.


We know that,


k( multiplier) = 1/ (1-MPC) = 1/ (1-0.67) = 3.03


k = ∆Y ∕ ∆I


0.03 = ∆Y ∕ 300


∆Y = Rs. 909 Cr.


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