Question : The saving function of an economy is given as S=-40+0.5Y. Calculate the total increase in income if investment expenditure increases by Rs. 600 crore.
Option 1: 1100
Option 2: 1200
Option 3: 1300
Option 4: 1400

Question

Question : The saving function of an economy is given as S=-40+0.5Y. Calculate the total increase in income if investment expenditure increases by Rs. 600 crore.

Option 1: 1100

Option 2: 1200

Option 3: 1300

Option 4: 1400

Team Careers360 · Accepted Answer

Correct Answer: 1200

Solution : $MPC= 0.5\ \ K=\frac{1}{1-0.5} \ \ K= 2 \ \ K=\frac{\Delta Income}{\Delta Investment} \ \ 2=\frac{\Delta Y}{600} \ \ \Delta Y= 1200 crore. \ \ Hence, Option\, B\, is\, correct.$

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Question : The saving function of an economy is given as S=-40+0.5Y. Calculate the total increase in income if investment expenditure increases by Rs. 600 crore.Option 1: 1100Option 2: 1200Option 3: 1300Option 4: 1400

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Question : The saving function of an economy is given as S=-40+0.5Y. Calculate the total increase in income if investment expenditure increases by Rs. 600 crore.
Option 1: 1100
Option 2: 1200
Option 3: 1300
Option 4: 1400