the value of mpc of an economy is 0.4 what amount of new investment is required to generate new income of rupees 500 Crore in

August 2023 1 3 Report

the value of mpc of an economy is 0.4 what amount of new investment is required to generate new income of rupees 500 Crore in the economy

Answer:

If half of the increase in income is spend on consumption then MPC = 0.5

Multiplier(k) => Change in income / change ininvestment = 1/ (1-MPC)

=> change in income/ 100 = 1/ 0.5

=> change in income/ 100 = 2

=> change in income = 2 * 100 = 200 crores.