How much additional income is generated in an economy with additional investment of Rs 100 crore, and when MPC=\(\frac{ 1}{2 }\)?
Answer & explanation
Correct answer: option 2
The correct ansswer is option 2: 200 crore
Change in income = k (multiplier ) * Change in investment expenditure
K= \(\frac{ 1}{ \text 1- MPC}\)
k= \(\frac{1 }{\text 1 - 0.5 }\)
= 2 * Change in income
= 2 * 100 = 200