When is an economic investment increases by Rs 1100 and MPC is 0.5. Calculate change in income.
Answer & explanation
Correct answer: option 3
The correct answer is option (3) : 2200
The change in income can be calculated using the formula :
Change in Income = $\frac{\text{Change in Investment}}{MPC}$
Given that the change in investment is Rs 1100 and MPC is 0.5
Change in Income = $\frac{1100}{0.5}=2200$
Therefore, the correct answer is (3) 2200.