in an economy every time income rises ,75% of increase in income is spent on consumption , now suppose in the same economy , investment rises by Rs. 750 Crore , Calculate the following : (i) change in income ,(ii) change in saving .

in an economy every time income rises ,75% of increase in income is sp

1.	in an economy every time income rises ,75% of increase in income is spent on consumption , now suppose in the same economy , investment rises by Rs. 750 Crore , Calculate the following : (i) change in income ,(ii) change in saving .
Answer» spending 75% of increase in income on consumption means MPC=75% (i) Multiplier (K) `=(1)/(1-MPC)` `=(1)/(1-(75)/(100))=(1)/((25)/(100))=4` `K=(Delta Y)/(Delta I) or 4= (Delta Y) /(750)` Or `Delta Y =4xx750= Rs. 3,000` crore ( change in income is Rs. 3,000 crore ) (ii) `MPS=1-MPC` `=1-75%= 25%` change in saving =`25%` of change in income `=25% " of " 3,000` `=Rs. 750 ` crore