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An increase in investment by 5000cr leads to increase in national income which is four times more than the increase in investment . Calculate MPS?
Most Upvoted Answer
An increase in investment by 5000cr leads to increase in national inco...
Calculation of MPS
Given Data:
- Increase in investment = 5000 crore
- Increase in national income = 4 times the increase in investment
Calculation:
To calculate MPS, we need to use the formula:
MPS = ΔS / ΔY
Where, ΔS = Change in savings and ΔY = Change in income
Given that increase in national income is four times the increase in investment, we can calculate the change in income as follows:
ΔY = 4 x 5000 crore = 20,000 crore
Let us assume that the entire increase in income is saved. In this case, ΔS would be equal to ΔY
ΔS = 20,000 crore
Therefore, MPS = ΔS / ΔY = 20,000 crore / 20,000 crore = 1
Explanation:
The marginal propensity to save (MPS) is the fraction of additional income that is saved rather than spent. In this case, we assumed that the entire increase in income is saved, which means that the MPS is equal to 1. This implies that for every additional rupee earned, the entire amount is saved and none of it is spent.
This is an unrealistic assumption as people tend to spend some portion of their additional income. In reality, the MPS is usually less than 1, which means that people tend to spend some portion of their additional income.
Community Answer
An increase in investment by 5000cr leads to increase in national inco...
∆i =5000
∆y=∆i×4
=5000×4
=20000
k =∆y =20000 =4
∆i 5000
k=1
mps
4 =1
mps
0.25
∆y=∆i×4
=5000×4
=20000
k =∆y =20000 =4
∆i 5000
k=1
mps
4 =1
mps
0.25
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An increase in investment by 5000cr leads to increase in national income which is four times more than the increase in investment . Calculate MPS?
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An increase in investment by 5000cr leads to increase in national income which is four times more than the increase in investment . Calculate MPS? for Class 12 2024 is part of Class 12 preparation. The Question and answers have been prepared according to the Class 12 exam syllabus. Information about An increase in investment by 5000cr leads to increase in national income which is four times more than the increase in investment . Calculate MPS? covers all topics & solutions for Class 12 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for An increase in investment by 5000cr leads to increase in national income which is four times more than the increase in investment . Calculate MPS?.
An increase in investment by 5000cr leads to increase in national income which is four times more than the increase in investment . Calculate MPS? for Class 12 2024 is part of Class 12 preparation. The Question and answers have been prepared according to the Class 12 exam syllabus. Information about An increase in investment by 5000cr leads to increase in national income which is four times more than the increase in investment . Calculate MPS? covers all topics & solutions for Class 12 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for An increase in investment by 5000cr leads to increase in national income which is four times more than the increase in investment . Calculate MPS?.
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