The increase in income in an economy is four times more than the increase in investment. What is the value of marginal propensity to consume in this economy?

0.8

The correct answer is Option (3) → 0.8

Increase in income is 4 times "more" than the increase in investment. It means if investment increase by 100, the increase in income will be Rs 500 i.e. is 100 + 4 times 100.
That means the investment multiplier (K) = Change in  Income/Change in Investment = 5.

K = 1/ (1- MPC)

5 = 1/ (1- MPC)

1- MPC = 1/5

MPC =1 - 1/5 = 4/5 = 0.80

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