Consumption Expenditure(Rs.) | Saving (Rs.) | Income (Rs.) | Marginal Propensity to Consume |
100 | 50 | 150 | \[-\] |
175 | 75 | \[-\] | \[-\] |
250 | 100 | \[-\] | \[-\] |
325 | 125 | \[-\] | \[-\] |
Answer:
We know that, \[K=\frac{\Delta Y}{\Delta I}\] Where, K = Investment multiplier \[\Delta Y\]= Change in income \[\Delta I\] =Change in investment Also, \[\Delta Y=AC+\Delta /\] \[\Rightarrow \,\,\,\,\Delta I=\Delta Y-\Delta C\] \[[\Delta C=\]Change in consumption\[]\] Now, \[K=\frac{\Delta Y}{\Delta Y-\Delta C}[\therefore \Delta /=\Delta Y-\Delta C]\] Dividing the numerator and denominator by\[\Delta Y\], we get \[\Delta Y\] \[K=\frac{\Delta Y}{\frac{\Delta Y}{\Delta Y}-\frac{\Delta C}{\Delta Y}}\] \[K=\frac{1}{1-MPC}\] \[\left[ \because \frac{\Delta C}{\Delta Y}=MPC \right]\] \[\Rightarrow \] \[K=\frac{1}{MPS}\] \[[\because MPC+MPS=1\Rightarrow 1-MPC=MPS]\] Hence, \[K=\frac{1}{MPS}\]
Formulae used \[Y=C+S,MPC=\frac{\Delta C}{\Delta Y}\] Consumption Expenditure (Rs.) Saving (S)(Rs.) Income(Rs.) \[(Y=C+S)\] Change in Consumptions Expenditure\[(\Delta Y)\] Change in Income\[(\Delta Y)\] Marginal Propensity to Consume(MPC) 100 50 150 \[-\] \[-\] \[-\] 175 75 250 75 100 0.75 250 100 350 75 100 0.75 325 125 450 75 100 0.75
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