In an economy investment is increased by र 2000 crores. Calculate change in total income if MPS is 0.25.

Solution

increment straight I space equals space 2000 space comma space space space space space space space space MPS space equals space 0.25 space space equals space 1 fourth

straight K space equals space 1 over MPS space equals space fraction numerator 1 over denominator 1 divided by 4 end fraction space equals space 4

straight K space equals space fraction numerator increment straight Y over denominator increment straight I end fraction space space or space 4 space space equals space fraction numerator increment straight Y over denominator 2000 end fraction increment straight Y space equals space 4 space cross times space 2000 space equals space 8000 space crores.

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