In an economy, the Marginal Propensity to Consume is 0.75

CBSE Class 12 CBSE Class 12 Economics
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1

In an economy, the Marginal Propensity to Consume is 0.75. Investment expenditure in the economy increases by Rs 75 crore. Calculate the total increase in National Income.

2

Here,
MPC =0.75, ∆I = Rs 75 crore
∆I = ∆S=Rs 75 crore
MPS =1 - MPC =1 - 0.75 = 0.25
Now, MPS = ∆S / ∆Y =or 0.25 = 75 / ∆Y or ∆Y = 75 / 0.25
Change in National Income (∆Y) = Rs 300 crore