The Question : Calculate Change in Income (ΔY) for a hypothetical economy. Given that:
A) Marginal Propensity to Consume (MPC) = 0.8, and
B) Change in Investment (ΔI) = ₹1,000 crores
Solution for the question :
Solution:Given ΔI = ₹1,000 crores MPC = 0.8 As we know, Multiplier (K) = 1/1-MPC = 1/1-0.8 = 1/0.2 = 5 times We know K = ΔY/ΔI 5 = ΔY/1000 ΔY = ₹5,000 crores
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