Question 53
HardOriginal questionInvestment rises by ₹100 crore and the MPC is 0.8. When the multiplier process is complete, the total rise in saving is
Show the answer and explanation
CorrectNot quiteAnswer B
Correct answer: B
Explanation
ΔY = 500 and MPS = 0.2, so ΔS = 0.2 × 500 = ₹100 crore.
The rise in saving equals the rise in investment, as the new equilibrium needs S = I.
Worth noting
₹20 crore is the saving out of the first round only.
- Concept
- Saving rises to match investment
- Typical timeTypical
- 100 s
- Your timeYours
- —
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