Question

Calculate MPC and Multiplier (k) from the following data:

Income	100	200	300
Consumption	80	160	250

Answer 1

Marginal Propensity to consume refers to the percentage change in consumption for every one rupee of change in the income. It is the ratio between the change in income and corresponding change in consumption.

Investment multiplier refers to the number of time by which the increase in output or income exceeds the increase in investment. It is measured as the ratio between change in income and change in investment and it is denoted as 'k'.

K= 1/ (1-MPC)

Income	100	200	300
Consumption	80	160	250
MPC	-	0.80	0.90
Multiplier (K)	-	5	10