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Determination Of Income And Employment

Question

In an economy investment increases by 120 crores. The value of multiplier is 4. Calculate MPC.

Solution

straight K space equals space fraction numerator 1 over denominator 1 minus MPC end fraction space or space 4 space equals space fraction numerator 1 over denominator 1 minus MPC end fraction space or space 4 space minus space 4 space MPC space equals space 1

or space 4 space MPC space equals space 4 space minus space 1 space equals space 3

MPC space equals space 3 over 4 space equals space 0.75