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?

0.75

The correct answer is Option (2) → 0.75

Increase in income is 4 times the increase in investment.
That means the investment multiplier (K) = 4.

K = 1/ (1- MPC)

4 = 1/ (1- MPC)

1- MPC = 1/4

MPC =1 - 1/4 = 3/4 = 0.75

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