Determination of Income and Employment-Propensity to Consume and Propensity to Save (CBSE (Central Board of Secondary Education- Board Exam) Class-12 Economics): Questions 20 - 22 of 22

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Question number: 20

» Determination of Income and Employment » Propensity to Consume and Propensity to Save

Essay Question▾

Describe in Detail

In an economy an increase in investment leads to increase in national income which is three times more than the increase in investment. Calculate marginal propensity to consume.

Explanation

Increase in income = 3 times more than the increase in investment.

Here, 3 times more than increase in investment = 3 times of investment + Initial incestment

K = 3

We know that K= Equation

3= Equation

Equation

MPC = Equation , MPC = 0.66

So, value of marginal

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Question number: 21

» Determination of Income and Employment » Propensity to Consume and Propensity to Save

Essay Question▾

Describe in Detail

Explain ‘saving function’ with the help of a schedule. Also record marginal propensity to save in the schedule.

Explanation

This functional relation between saving and income is called saving function it is represented as s = Equation Equation

Here, Equation means autonomous saving

S represent Marginal propensity to save

Equation represents disposable income.

Income and saving function diagram

This image is of Income and saving function diagram

Income (in

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Question number: 22

» Determination of Income and Employment » Propensity to Consume and Propensity to Save

Short Answer Question▾

Write in Short

Rs. 200 crore increase in investment lead to a rise in national income by Rs. 1000 crores. Find out marginal propensity to consume.

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