The follwing table illustrates the multiplier process after making an additional of Rs. 1,000 crores. Calculate the messing values.

Explanation

(a) In the multiplier process, increase in income in the first round is always equal to additional investment .
So, Increase in Income in the first round = Rs. 1,000 crores.
(b) The saving of Rs. 200 crores indicates that increase in consumption will be Rs. 800 crores in the first round.
Additonal consumption of Rs. 800 crores out of an additipnal income of Rs. 1,000 indicates that `80%` of income is spent, i.e. MPC =0.8 The values of second and third round are calculated on the basis of this data.
(c ) Total Increase in Income = Additional x k. In the given case:
Multiplier (k) `=(1)/(1-MPC)=(1)/(1-0.8)=5`
So, Total Increase in Income `=1,000xx5= Rs.5,000` crores
(d) Total Increase in Consumption = Total Increase in Income `xxMPC=5,000xx0.8=Rs.4,000` crores
(e) Total Increase in Saving= Total Increase in Income - Total Increase in Consumption `=5,000- 4,000 = Rs. 1,000 ` crores.
(f) Values of All other Rounds' calculated after subtracting the values of , second and thied round from the total increase in income, consumption and saving respectively.