An increase of Rs. 250 crore in investment in an economy resulted in total increase in income of Rs. 1,000 crore . Calculate the following : (a) Marginal propensity to consume (MPC) ,(b) change in saving , ( C) change in consumption expenditure , (d) Value of multiplier .

An increase of Rs. 250 crore in investment in an economy resulted in t

1.	An increase of Rs. 250 crore in investment in an economy resulted in total increase in income of Rs. 1,000 crore . Calculate the following : (a) Marginal propensity to consume (MPC) ,(b) change in saving , ( C) change in consumption expenditure , (d) Value of multiplier .
Answer» `K= ( Delta Y) /(DeltaI) =(1000)/(250)=4` `(a) K= (1)/(MPC ) or 4= (1) /(MPC)` `or 4-4 MPC=1` `or 4MPC=3` ` MPC =(3)/(4) =0.75` ( also ,MPS=1-0.75=0.25) (B) change in savings `Delta S= Delta Yxx MPS` `= 1,000xx0.25` `=250 ` crore ( C) ` Delta C= Delta YxxMPC` `= 1,000 xx0.75` `=750 ` crore (D) Value of miltiplier (K) ` =(Delta Y) /(Delta I)=(1000)/(250)=4`