Question

In an economy, investment expenditure is increased by 700 crore and MPC is 0.9. Calculate total increase in income and consumption expenditure

Answer 1

`K=(1)/(1-MPC)=(1)/(1-0.9)=(1)/(0.1)=(1)/(1//10)=10`
Total increase in income=Increase in investment`xxK`
=`700xx10=7000crore`
Total increase in consupmtion expenditure=0.9 of 7000
`=(9)/(10)=7000=6300crore`