In an economy, investment increases from 300 to 500. As a result of this equilibrium level of income increase by 2000. Calculate the marginal prepensity to consume.

Explanation

`" "Delta I= 500-300=200`
`" "K = (Delta Y)/(Delta I)= (2000)/(200) = 10 " "rArr K = (1)/(1- MPC)`
`" "10 = (1)/(1-MPC)`
`" "10-10 MPC= 1`
`" "- 10 MPC = 1 - 10`
`" "MPC= (9)/(10)= 0.9`