In an economy investment is increased by $R s 300$ crore. If marginal propensity to consume is $2 / 3$ , calculate increase in national income.

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Solution

Given
$M P C = \frac{2}{3} = 0.67$
$Δ I = R s .300$ crore
Working
$k = \frac{1}{1 - M P C} = \frac{1}{1 - 0.67} = 3.03$
$k = \frac{Δ Y}{Δ I}$
$3.03 = \frac{Δ Y}{300}$
$Δ Y = R s .909$ crore

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In an economy investment is increased by Rs300 crore. If marginal propensity to consume is 2/3, calculate increase in national income.

Given MPC=23=0.67ΔI=Rs.300 croreWorkingk=11−MPC=11−0.67=3.03k=ΔYΔI3.03=ΔY300ΔY=Rs.909 crore

In an economy investment is increased by $R s 300$ crore. If marginal propensity to consume is $2 / 3$ , calculate increase in national income.

Given
$M P C = \frac{2}{3} = 0.67$
$Δ I = R s .300$ crore
Working
$k = \frac{1}{1 - M P C} = \frac{1}{1 - 0.67} = 3.03$
$k = \frac{Δ Y}{Δ I}$
$3.03 = \frac{Δ Y}{300}$
$Δ Y = R s .909$ crore