In an economy, every time the National Income rises 20% of the rise in income is saved by households. Now suppose there is a rise in investment by Rs.100 crores, then the National Income in this economy will rise by what amount?

Rs.500 crores   

We know that:

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

OR

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

As, MPC + MPS = 1

According to the question;

\(\frac{ 1}{ 0.2}\) =\(\frac{\text{ΔY}}{ \text{100}}\)

\(\frac{ 10}{ 2}\) =\(\frac{\text{ΔY}}{ \text{100}}\)

5 =\(\frac{\text{ΔY}}{ \text{100}}\)

ΔY = 500 crores