A hypothetical economy tends to save only 25% of its additional income. How much additional income would be generated by it if the investment is increased by 50 crores?

200 crores

The correct answer is Option (3) → 200 crores

Marginal Propensity to Save (MPS) = 25% = 0.25
Increase in Investment (ΔI) = ₹50 crores

k = 1/ MPS

   = 1 / 0.25 = 4

ΔY= K × ΔI = 4×50 =200 crores