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Determination Of Income And Employment

Question

In an economy, level of income is र 2,000 crores and MPC is 0.75. Calculate total increase in income if investment increases by र 200 crores.

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 0.75 end fraction space equals space fraction numerator 1 over denominator 0.25 end fraction space equals space 4

Total increase in income = 200 x 4 = 800 crores.