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Determination Of Income And Employment

Question

In an economy MPS is 0.2. Investment increases by 1000 crores. Calculate total increase in national income.

Solution

straight K space equals space 1 over MPS space equals space fraction numerator 1 over denominator 0.2 end fraction space equals space fraction numerator 1 over denominator 1 divided by 5 end fraction space equals space 5

Increase in Income = K x Increase in investment = 5 x 1000 = 5000 crores.