In an economy investment expenditure increased by 400 crore and marginal propensity to consume is 0.8.

What will be the increase in income?

2 crore 20 crore 200 crore 2000 crore

2000 crore

Change in income = k (multiplier ) * Change in investment expenditure K= \(\frac{ 1}{\text 1 - MPC }\) k= \(\frac{1 }{1 - 0.8 }\)= 5 Change in Income = 5 * 400 = 2000