Assume that in an economy increased consumption is equal to increased saving, how many times will the national income increase in such an economy with an increase in investment?

2 times

Consumption plus saving is equal to disposable income. Also, an increase in consumption plus an increase in savings is also equal to an increase in disposable income. It is assumed in the question that increase in consumtion is equal to increase in saving. That means MPC i.e. marginal propensity to consume is 0.5.

We know that:

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

According to the question;

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

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

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

\(\frac{ 2}{ 1}\) = \(\frac{\text{ΔY}}{ \text{ΔI}}\)

That means with an increase in investment, the national income increases 2 times.