CBSE 2019 Class 12 Economics Delhi Set 1

Question : 8 of 19

Marks: +1, -0

If in an economy:
Change in initial investments

(∆ {\I})=\₹ 500

crores
Marginal Propensity to Save (MPS)

=0.2

Find the value of the following :
(a) Investment multiplier (k)
(b) Change in final income

(∆ {\Y})

Solution:

Change in initial investment

(∆ {\I})=\₹ 500

crores
Marginal propensity to save (MPS)

=0.2

(a) Investment multiplier

( {\K})=\;{1}/{ {\MPS}}

\;K=\;{1}/{\;\text " MPS "\;}

\;K=\;{1}/{0.2}

\;K=5

(b) Change in final income

(∆ {\Y})

{\K}\;=\;{∆ {\Y}}/{∆ {\I}}

∆ {\Y}\;= {\K} × ∆ {\I}

\;=5 × 500

\;=\₹ 2500 \;\text " crores. "\;

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