Question

Due to an increase in Investment, the national income increased by Rs. 10,000 crores. If 20% of additional income is saved, calculate the increase in investment. (Rs. 2,000 crofts)

Answer 1

If 20 % of the income is save then MPS =0.2.

Multiplier(k) => 10,000 / change ininvestment = 1/ MPS

=> 10,000 / change ininvestment = 1/0.2

=> 10,000 / change ininvestment = 5

=> change in investment = 10,000 / 5 = 2,000 crores.