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Question : In an economy, 75% of increased income is spent on consumption if Rs.4 crore are invested in a project, find out the increase in savings.

Option 1: 500

Option 2: 800

Option 3: 1000

Option 4: 400


Team Careers360 8th Jan, 2024
Answer (1)
Team Careers360 11th Jan, 2024

Correct Answer: 400


Solution : MPC=0.75

K=\frac{1}{1-MPC}

K=\frac{1}{1-0.75}

K=4

K=\frac{\Delta Income}{\Delta Investment}

4=\frac{\Delta Income}{4}

{\Delta Income}= 1600\, crore

MPS=\frac{\Delta Savings}{\Delta Income}

0.25=\frac{\Delta Savings}{1600} 

{\Delta Savings}= 400 \, crore.

Hence, \, Option\, D \, is\, correct.

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