Question : An economy, the equilibrium level of income is Rs.12500. The ratio of marginal propensity to consume and marginal propensity to save is 4:1. Calculate the additional investment needed to reach a new equilibrium level of income of Rs.20,000 crore.
Option 1: 600
Option 2: 800
Option 3: 1200
Option 4: 1000

Question

Question : An economy, the equilibrium level of income is Rs.12500. The ratio of marginal propensity to consume and marginal propensity to save is 4:1. Calculate the additional investment needed to reach a new equilibrium level of income of Rs.20,000 crore.

Option 1: 600

Option 2: 800

Option 3: 1200

Option 4: 1000

Team Careers360 · Accepted Answer

Correct Answer: 1200

Solution : $MPC:MPS=4:1 or 0.80:0.80 (MPC+MPS=1)\ K=\frac{1}{1-MPC}\K=\frac{1}{1-0.80}= 5\ \Delta Y= 20000-12500=7500\K=\frac{\Delta Income}{\Delta Investment}\5=\frac{7500}{\Delta Investment}\\Delta Investment= 1200 \, crore\ Hence, Option \, C\, is\, correct.$

Exams

Colleges

Predictors

Resources

Quick links

B.Tech CompanionUse Now Your one-stop Counselling package for JEE Main, JEE Advanced and BITSAT

Exams

Colleges & Courses

Predictors

Resources

Exams

Colleges

Predictors & E-Books

Resources

Engineering Preparation

Medical Preparation

Online Courses

Products

Exams

Colleges

Resources

Exams

Colleges

Predictors & Articles

Resources

Exams

Colleges

Predictors

Resources

NEET CompanionUse NowYour one-stop Counselling package for NEET, AIIMS and JIPMER

Exams

Colleges

Upcoming Events

Resources

Exams

Colleges

Resources

Quick Links

Top Streams

Specializations

Resources

Top Providers

Exams

Colleges

Resources

Diploma Colleges

Exams

Colleges

Resources

Exams

Resources

Top Courses & Careers

Colleges

Exams

Upcoming Events

Resources

Other Exams

Exams

Colleges

Top Countries

Student Visas

Exams

Top Schools

Products & Resources

NCERT Study Material

Related Questions

Question : The equilibrium level of income in an economy is Rs. 3000 crore. The autonomous consumption expenditure is equal to Rs.250 crore and investment expenditure is Rs.1000 crore. Calculate marginal propensity to save.

Question : _____________________ is defined as ratio of change in consumption to change in total income

Question : In an economy, marginal propensity to consume is 0.80. If investment expenditure is increased by Rs.400 crore, calculate the total increase in income.

Question : In an economy, investment has increased by Rs.250 crore. If marginal propensity to consume is 3/5, calculate increase in national income.

Question : Given that national income is Rs.100 crore and consumption expenditure is Rs.72 crore, When income rises to Rs. 200 crore and consumption expenditure to Rs.108 crore, what will be the average propensity to consume and a marginal propensity to save?

Trending Articles/News

Sign In/Sign Up

Download the Careers360 App on your Android phone

B.Tech CompanionUse Now
Your one-stop Counselling package for JEE Main, JEE Advanced and BITSAT

NEET CompanionUse Now
Your one-stop Counselling package for NEET, AIIMS and JIPMER