CameraIcon
CameraIcon
SearchIcon
MyQuestionIcon


Question

Find incremental investment when equilibrium GDP increases by Rs 50,000 and half of additional income is always saved in the economy.


  1. Rs 25,000

  2. Rs 50,000

  3. Rs 15,000

  4. Rs 35,000


Solution

The correct option is A

Rs 25,000


Change in savings =50,000×12=25,000

We know,             MPS=ΔSΔY=25,00050,000=0.5

We know,

                             Multiplier (M)=11MPC=1MPS

Or,                          M=ΔYΔI

Now, MPS = 0.5, we get ΔI=ΔYM

                                      =50,0002=25,000                    [M=1MPS=10.5=2]

Increase in GDP by Rs 50,000 is caused by increase in investment of Rs 25,000.

flag
 Suggest corrections
thumbs-up
 
0 Upvotes


Similar questions
View More


People also searched for
View More



footer-image