In case National Income of an Economy increases from ₹200 crores to ₹250 crores and its savings increases from ₹50 crores to ₹70 crores. Identify Marginal propensity to consume.
Answer & explanation
Correct answer: option 3
The correct answer is Option (3) → 0.6
Change in Income = Rs 50 Cr
Change in Saving = Rs 20 cr
MPS=ΔS/ΔY
=20/50 = 0.4
MPC= 1- MPS
= 1 - 0.4 = 0.6