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in an economy ,a 20% increase in in...

in an economy ,a 20% increase in investment results in 100% increase in income . Calculate the marginal propensity to consume (MPC).

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K ( investment multiplier )
`(DeltaY)/(DeltaI)`
`=("%change in income")/("% change in investment")`
`=(100)/(20 )=5`
`MPS=(1)/(MPS)=(1)/(5)=0.2`
MPC =1-MPS`
`=1-0.2=0.8`
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