In an economy, every time the income rises, `75` percent of the rise i – InterviewSolution

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1.	In an economy, every time the income rises, `75` percent of the rise in income is spent on consumption. Now suppose in the same economy investment rises by Rs. `750` crore. Calculate : (i) change in income, (ii) change in saving.
Answer» (i) `MPC=0.75, :. MPS=0.25` `:. K=1/(1-MPC)=1/(1-0.75)=4` `:. DeltaY=K. Delta I=4xx750` crore = Rs. `3,000` crore `133` (ii) `DeltaS=DeltaY-DeltaC=3,000-(0.75xx3,000)` `=3000-2250` crore = Rs. `750` crore.

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