In an economy, an increase in investment leads to increase in national income which is three times more than the - Economics - Determination of Income and Employment

Question

In an economy, an increase in investment leads to increase in
national income which is three times more than the increase in
investment Calculate MPC

Sanjari Kalantri · Accepted Answer

Dear Student,

The increase in investment in the economy ∆I leads to an increase in income ∆Y which is three times more than the increase in investment ∆I
 This means that the increase in income is 4 times the increase in investment, or,∆Y = ∆I + 3∆I⇒ ∆Y = 4∆I⇒ ∆Y∆I = 4 = Investment MultiplierNow, Investment Multiplier = 11 - MPC⇒ 4 = 11 - MPC⇒ 4 - 4MPC = 1⇒ 3 = 4MPC⇒ MPC = 34 = 0
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In an economy, an increase in investment leads to increase in national income which is three times more than the increase in investment. Calculate MPC.