Find incremental investment when equilibrium GDP increases by Rs 50,000 and half of additional income is always saved in the economy.
Change in savings =50,000×12=25,000
We know, MPS=ΔSΔY=25,00050,000=0.5
Now, MPS = 0.5, we get ΔI=ΔYM
Increase in GDP by Rs 50,000 is caused by increase in investment of Rs 25,000.