If the Marginal propensity to save (MPS) is 0.5 and the initial change in investment is ₹250 crore, then the final change in income is:

₹500 crore

The correct answer is Option 4: ₹500 crore

MPC + MPS = 1

MPC = 1 - MPS

MPC = 1 - 0.5

MPC = 0.5

We know that:

k = \(\frac{ 1}{ 1-MPC}\) also, k = \(\frac{\text{ΔY}}{ \text{ΔI}}\)

According to the question;

\(\frac{ 1}{ 1-0.5}\) =\(\frac{\text{ΔY}}{ \text{250}}\)

\(\frac{ 1}{ 0.5}\) =\(\frac{\text{ΔY}}{ \text{250}}\)

\(\frac{10 }{ 5}\) =\(\frac{\text{ΔY}}{ \text{250}}\)

2 = \(\frac{\text{ΔY}}{ \text{250}}\)

ΔY = ₹500 crore