in an economy the equilibrium level of income is RS. 12,000 crore. the ratio of marginal propensity to consume amd mariginal propensity to save is 3 : 1 . calculate the additional investment needed to reach a new equilibrium level of income of RS. 20,000 crore.

 MPC / MPS = 3/1 

therefore MPC = 3MPS  - - - (1)

MPC+MPS = 1

 => MPC = 1 - MPS 

SUBSTITUTING (1)

3MPS = 1 - MPS

4 MPS = 1

MPS = 1/4

=0.25

MPC = 3MPS 

=0.25 x 3 = 0.75

K = 1/MPS 

K = 1 / 0.25 

= 4

K =  Δ Y /  Δ I

4 = 12,000 /  Δ I

 Δ I = 12,000 / 4

= 3,000

NEW CHANGE IN INCOME = 20,000

K =  Δ Y /  Δ I

4 = 20,000 /  Δ I 

 Δ I = 20,000 / 4

 = 5,000

ADDITIONAL INVESTMENT NEEDED TO BE MADE = 5,000 - 3,000 = 2,000

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i m not sure if the answer is right if there is any mistake pls do tell me :)

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