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In an economy, every time the National Income rises 20% of the rises in income is saved by households.Now suppose there is a rise in investment by Rs. 100 crores, then the National Income in this economy will rise by:
- a)Rs. 125 crores
- b)Rs. 500 crores
- c)Rs. 2,000 crores
- d)Rs. 20 crores
Correct answer is option 'B'. Can you explain this answer?
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Most Upvoted Answer
In an economy, every time the National Income rises 20% of the rises i...
If 20% of the income is sav ed, then MPS = 0.2 and investment multiplier k = 1/MPS i.e. k = 1/0.2 = 5 Change in Y/Change in I i.e. Change in Y = 5 × 100 = Rs. 500 crores
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In an economy, every time the National Income rises 20% of the rises i...
Explanation:
Given information:
- Every time the National Income rises, 20% of the rise in income is saved by households.
Let's assume the initial National Income in the economy is N.
Step 1: Calculating the rise in National Income
- If the rise in investment is Rs. 100 crores, it means that the investment has increased by Rs. 100 crores.
- According to the given information, the rise in National Income is directly proportional to the rise in investment.
- So, the rise in National Income can be calculated as follows:
Rise in National Income = (20/100) * Rs. 100 crores
= Rs. 20 crores
Step 2: Calculating the new National Income
- The new National Income is the sum of the initial National Income and the rise in National Income.
- So, the new National Income can be calculated as follows:
New National Income = Initial National Income + Rise in National Income
= N + Rs. 20 crores
Since the given options are in crores, we need to convert the rise in National Income to crores.
Step 3: Converting rise in National Income to crores
- Given that the rise in National Income is Rs. 20 crores.
- To convert it to crores, we divide it by 100.
- So, the rise in National Income in crores can be calculated as follows:
Rise in National Income (in crores) = Rs. 20 crores / 100
= Rs. 0.2 crores
Step 4: Calculating the new National Income in crores
- The new National Income in crores can be calculated as follows:
New National Income (in crores) = Initial National Income (in crores) + Rise in National Income (in crores)
= N + Rs. 0.2 crores
Since the rise in investment is Rs. 100 crores, it implies that the rise in National Income is Rs. 0.2 crores.
Now, we can compare the rise in National Income with the given options.
Step 5: Comparing the rise in National Income with the given options
- The given options are:
a) Rs. 125 crores
b) Rs. 500 crores
c) Rs. 2,000 crores
d) Rs. 20 crores
- Comparing the rise in National Income (Rs. 0.2 crores) with the given options, we can see that none of the options match the calculated value.
Conclusion:
- None of the given options matches the calculated rise in National Income (Rs. 0.2 crores). Therefore, none of the given options is the correct answer.
Given information:
- Every time the National Income rises, 20% of the rise in income is saved by households.
Let's assume the initial National Income in the economy is N.
Step 1: Calculating the rise in National Income
- If the rise in investment is Rs. 100 crores, it means that the investment has increased by Rs. 100 crores.
- According to the given information, the rise in National Income is directly proportional to the rise in investment.
- So, the rise in National Income can be calculated as follows:
Rise in National Income = (20/100) * Rs. 100 crores
= Rs. 20 crores
Step 2: Calculating the new National Income
- The new National Income is the sum of the initial National Income and the rise in National Income.
- So, the new National Income can be calculated as follows:
New National Income = Initial National Income + Rise in National Income
= N + Rs. 20 crores
Since the given options are in crores, we need to convert the rise in National Income to crores.
Step 3: Converting rise in National Income to crores
- Given that the rise in National Income is Rs. 20 crores.
- To convert it to crores, we divide it by 100.
- So, the rise in National Income in crores can be calculated as follows:
Rise in National Income (in crores) = Rs. 20 crores / 100
= Rs. 0.2 crores
Step 4: Calculating the new National Income in crores
- The new National Income in crores can be calculated as follows:
New National Income (in crores) = Initial National Income (in crores) + Rise in National Income (in crores)
= N + Rs. 0.2 crores
Since the rise in investment is Rs. 100 crores, it implies that the rise in National Income is Rs. 0.2 crores.
Now, we can compare the rise in National Income with the given options.
Step 5: Comparing the rise in National Income with the given options
- The given options are:
a) Rs. 125 crores
b) Rs. 500 crores
c) Rs. 2,000 crores
d) Rs. 20 crores
- Comparing the rise in National Income (Rs. 0.2 crores) with the given options, we can see that none of the options match the calculated value.
Conclusion:
- None of the given options matches the calculated rise in National Income (Rs. 0.2 crores). Therefore, none of the given options is the correct answer.
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In an economy, every time the National Income rises 20% of the rises in income is saved by households.Now suppose there is a rise in investment by Rs. 100 crores, then the National Income in this economy will rise by:a)Rs. 125 croresb)Rs. 500 croresc)Rs. 2,000 croresd)Rs. 20 croresCorrect answer is option 'B'. Can you explain this answer?
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In an economy, every time the National Income rises 20% of the rises in income is saved by households.Now suppose there is a rise in investment by Rs. 100 crores, then the National Income in this economy will rise by:a)Rs. 125 croresb)Rs. 500 croresc)Rs. 2,000 croresd)Rs. 20 croresCorrect answer is option 'B'. Can you explain this answer? for Humanities/Arts 2024 is part of Humanities/Arts preparation. The Question and answers have been prepared according to the Humanities/Arts exam syllabus. Information about In an economy, every time the National Income rises 20% of the rises in income is saved by households.Now suppose there is a rise in investment by Rs. 100 crores, then the National Income in this economy will rise by:a)Rs. 125 croresb)Rs. 500 croresc)Rs. 2,000 croresd)Rs. 20 croresCorrect answer is option 'B'. Can you explain this answer? covers all topics & solutions for Humanities/Arts 2024 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for In an economy, every time the National Income rises 20% of the rises in income is saved by households.Now suppose there is a rise in investment by Rs. 100 crores, then the National Income in this economy will rise by:a)Rs. 125 croresb)Rs. 500 croresc)Rs. 2,000 croresd)Rs. 20 croresCorrect answer is option 'B'. Can you explain this answer?.
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