CBSE 2019 Class 12 Economics Delhi Set 2

Question : 1 of 3

Marks: +1, -0

SECTION-B

(Macro-economics)

If in an economy :
Change in initial investment

(∆ {\I})=\₹ 700

crores Marginal Propensity to Save (MPS)

={0 . 2}

Find the values of the following:
(a) Investment Multiplier (k)
(b) Change in final income (ΔY)

Solution:

(a) Change in initial investment

(∆ {\I})=₹ 700

crores
Marginal propensity to save

(

MPS)

=0.2

Investment multiplier

( {\k})=\;{1}/{ {\MPS}}

\;=\;{1}/{0.2}

{K}\;={5}

(b) Change in final income

(∆ {\Y})

{\K}=\;{∆ {\Y}}/{∆ {\I}}

∆ {\Y}\;= {\K} × ∆ {\I}

\;=5 × 700

\;=₹ 3500 \;\text " crores. "\;

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