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A change in investment in an economy by ₹2,000 crores leads to an increase in its national income by ₹8,000 crores. What will be the change in consumption ? |
₹6,400 crores ₹6,600 crores ₹6,000 crores ₹6,200 crores |
₹6,000 crores |
The correct answer is option (3) : ₹6,000 crores 1. Calculate the Multiplier: Multiplier = Change in National Income / Change in Investment Multiplier = ₹8,000 crores / ₹2,000 crores = 4 2.Multiplier=ΔI/ΔY 1/ (1-MPC) = 4
On further simplification,
MPC= 3/4
The formula to find the change in consumption (ΔC) is: ΔC=MPC×ΔY = 3/4 *8000 = 6,000 cr |
