Q18 of 39 Page 1

Estimate the change in final income if Marginal Propensity to Consume (MPC) is 0.75 and change in initial investment is Rs. 2,000 crores.

Marginal Propensity to Consume MPC = 0.75


Therefore, k = 1/(1-MPC) = 1/(1-0.75) = 1/0.25 = 4.


Change in final income = k x Change in investment = 4 x 2000 crores = 8000 crores.


More from this chapter

All 39 →
11

(a) ‘‘A firm under perfect competition is a price taker, whereas, a firm under monopoly is a price maker.’’ Defend or refute the given statement with valid reasons.

(b) What is meant by ‘‘product differentiation’’? Explain with example.


 15

Primary deficit in a government budget will be zero, when ___________ . (Choose the correct alternative)

 20

Discuss briefly the ‘‘credit controller’’ function of a Central Bank.

 24

(a) Distinguish between ‘Trade Deficit’ and ‘Current Account Deficit’.

(b) Discuss briefly the concept of flexible exchange rate system of foreign exchange rate determination.