There is increase in investment of र 100 crores in an economy. Marginal propensity to consume is 1. What can you say total increase in income? Calculate.

Solution

straight K space equals space fraction numerator 1 over denominator 1 minus MPC end fraction space equals space fraction numerator 1 over denominator 1 minus 1 end fraction space equals space 1 over 0 space equals space infinity space left parenthesis Infinite right parenthesis infinity space equals space fraction numerator increment straight Y over denominator increment straight I end fraction increment straight Y space equals infinity space cross times space increment straight I space equals space infinity

Total increase in income = ∞

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