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In an economy, investment increases from 300 to 500. As a result of this equilibrium level of income increase by 2000. Calculate the marginal prepensity to consume. |
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Answer» Solution :`""Delta I= 500-300=200` `""K = (Delta Y)/(Delta I)= (2000)/(200) = 10 ""RARR K = (1)/(1- MPC)` `""10 = (1)/(1-MPC)` `""10-10 MPC= 1` `""- 10 MPC = 1 - 10` `""MPC= (9)/(10)= 0.9` |
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