CBSE 2023 Class 12 Economics Delhi Set 1

Question : 7 of 49

Marks: +1, -0

If in an economy, the Investment Multiplier is 4 and Autonomous Consumption is

₹ 30

crore, the relevant consumption function would be ________.
(Fill up the blank with correct alternative)

Solution:

(a)

C=30+0.75 Y

Explanation: Investment Multiplier

(k)=4

Autonomous Consumption

(\ov{ {\C}})=₹ 30

crore

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

4\;=\;{1}/{1- {\MPC}}

{\MPC}\;=\;{1}/{4}

{\MPC}\;=0.25

{\MPC}\;=1-0.25

{\MPC}\;=0.75

Consumption Function:

\; {\C}=\ov{ {\C}}+{\MPC}( {\Y})

\; {\C}=30+0.75 {\Y}

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