CBSE 2023 Class 12 Economics Delhi Set 1

Question : 13 of 49

Marks: +1, -0

In an economy, the value of Marginal Propensity to Save (MPS) is

{0 . 2 5}

, what will be the value of increase in income, if investments increased by

\₹ 200

crores?

Solution:

(d) ₹800 crores
Explanation:
Given: Increase in Investment

=∆ {\I}=200

crore

\;\text " MPS "\;=0.25

To Find: Increase in Income

=∆ {\Y}=

?
Solution:

\;\text " Here, "\;

{\MPC}+ {\MPS}\;=1

{\MPC}+0.25\;=1

{\MPC}=1-0.25\;=0.75

\;\text " Investment Multiplier "\;\;

=k=\;{1}/{1- {\MPC}}

\;=\;{1}/{1-0.75}=\;{1}/{0.25}

\;=4

Now,

k\;=\;{∆ Y}/{∆ I}

4\;=\;{∆ Y}/{200}

4 × 200\;=∆ Y

∆ Y\;=₹ 800 \;\text " crore "\;

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