In an economy people always consume half of any additional income and save the other half determine the additional income - Economics - Determination of Income and Employment

Question

In an economy people always consume half of any additional income
and save the other half determine the additional income generated
if government make an additional expenditure of 20000 crore rupees

Suman Lata · Accepted Answer

Dear Student

âˆ†Y= ?
âˆ†I = 20, 000/-
K =
âˆ†Y/ âˆ†I

MPC = 0 5
MPS = 0 5
K = 1/MPS
= 1/0 5
= 2

2 = âˆ†Y / 20,000
âˆ†Y= 40,000/-

Regards

In an economy people always consume half of any additional income and save the other half determine the additional income generated if government make an additional expenditure of 20000 crore rupees