Question

as a result of increase in investment by 1000 crores , national income increases by `Rs. 5000` crore , find out value of multilpier ,MPC and MPS.

Answer 1

Multiplier (K) =`(DeltaY)/(DeltaI) =(5000)/(1000) = 5`
`K= (1)/(MPS) or 5=(1)/(MPS) or 5MPS =1 `
`or MPS =(1)/(5) = 0.2`
`MPC= 1-MPS=1-0.2=0.8`