In an economy. Investment is increased by Rs. 300 crores. If marginal propensity to consume is 2/3, calculate increase in national income.

Answer

Increase in National Income = Rs. 900 crores.

Explanation

Multiplier (k)`=(1)/(1-MPC)=(1)/(1-2//3)=(1)/(0.33)=3`
We also know: `=("Change in Invomr "(DeltaY))/("Change in Investment"(Deltal))`
`3=("Change in Income"(DeltaY))/(300)`
Hence in National Income `(DeltaY)=Rs. 900` crores.