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Suppose there is new investment of Rs. 10 crores and the MPS is 0.2 the aggregate income increases by -

Given \(\Delta I = \text{Rs. } 10\text{ crores}\) and \(MPS = 0.2\), the investment multiplier is \(k = \frac{1}{MPS} = \frac{1}{0.2} = 5\). Therefore, aggregate income…

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Suppose there is new investment of Rs. 10 crores and the MPS is 0.2 the aggregate income increases by -

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Correct answer A

Given ΔI=Rs. 10 crores\Delta I = \text{Rs. } 10\text{ crores} and MPS=0.2MPS = 0.2, the investment multiplier is k=1MPS=10.2=5k = \frac{1}{MPS} = \frac{1}{0.2} = 5. Therefore, aggregate income increases by ΔY=k×ΔI=5×10=Rs. 50 crores\Delta Y = k \times \Delta I = 5 \times 10 = \text{Rs. } 50\text{ crores}.

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