If government expenditure increased by Rs.500 and if the marginal propensity to consume is 3/5, National income will increase by- (a)500 (b)200 (c)125 (d)150.?

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If government expenditure increased by Rs.500 and if the marginal propensity to consume is 3/5, National income will increase by- (a)500 (b)200 (c)125 (d)150.?

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Read the report given below and answer the questions that follow:When, at a particular price level, aggregate demand for final goods equals aggregate supply of final goods, the final goods or product market reaches its equilibrium. Aggregate demand for final goods consists of ex-ante consumption, ex-ante investment, government spending, etc. The rate of increase in ex-ante consumption due to a unit increment in income is called marginal propensity to consume. For simplicity we assume a constant final goods price and constant rate of interest over short run to determine the level of aggregate demand for final goods in the economy. We also assume that the aggregate supply is perfectly elastic at this price. Under such circumstances, aggregate output is determined solely by the level of aggregate demand. This is known as effective demand principle. An increase (decreas e) in autonomous spending causes aggregate output of final goods to increase (decrease) by a larger amount through the multiplier process.The rate of increase in __________________ due to a unit increment in income is called marginal propensity to consume.

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Suppose the national income is rs.100 crore and the consumption expenditure is rs. 70 crore. What is the value of average propensity to save? What will be the value of marginal propensity to consume if the incomerises to rs.120 crore and consumption expenditure rises to rs. 100 crore?

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Read the news report given below and answer the question that follow:The Finance Minister Nirmala Sitharaman has proposed a sharp 34.5 per cent hike in capital expenditure to ₹5.54 lakh crore in the financial year 2022 in order to push growth. The massive increase comes at a time when the country is looking to recover from the Covid pandemic, as rising government spending is key to bringing the economy back on track.The government will also provide an additional ₹2 lakh crore to states for capital expenditure over and above its own commitment. “We will also work out a specific mechanism to nudge states to spend more of their Budget on creation of infrastructure,” Ms. Sitharaman said.The finance minister said that the government will launch a national asset monetisation pipeline which includes the sale of oil and gas pipelines, power transmission lines and operation of toll roads under the National Highway Authority of India.This year’s budget, according to the government, rests on six pillars: health and well-being, physical and financial capital and infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation and research and development, and “minimum government, maximum governance,” the finance minister had asserted. And capital expenditure is an important component that drives the growth.Q. What problem can the increase in this Capital Expenditure create?

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Read the news report given below and answer the question that follow:The Finance Minister Nirmala Sitharaman has proposed a sharp 34.5 per cent hike in capital expenditure to ₹5.54 lakh crore in the financial year 2022 in order to push growth. The massive increase comes at a time when the country is looking to recover from the Covid pandemic, as rising government spending is key to bringing the economy back on track.The government will also provide an additional ₹2 lakh crore to states for capital expenditure over and above its own commitment. “We will also work out a specific mechanism to nudge states to spend more of their Budget on creation of infrastructure,” Ms. Sitharaman said.The finance minister said that the government will launch a national asset monetisation pipeline which includes the sale of oil and gas pipelines, power transmission lines and operation of toll roads under the National Highway Authority of India.This year’s budget, according to the government, rests on six pillars: health and well-being, physical and financial capital and infrastructure, inclusive development for aspirational India, reinvigorating human capital, innovation and research and development, and “minimum government, maximum governance,” the finance minister had asserted. And capital expenditure is an important component that drives the growth.Q. ______________________ is an important component that drives the growth.

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If government expenditure increased by Rs.500 and if the marginal propensity to consume is 3/5, National income will increase by- (a)500 (b)200 (c)125 (d)150.?

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