DETERMI

NATI
ON
OFI
NCOMEAND
EMPLOYMENT

Q.
1. Fi
ndSwhen=200,
MPS=0.
4andY=1,
000

Q.
2. Ifper
sonaldi
sposabl
eincomei
sRs.1,
000cr
oreand
consumpti
onexpendit
ureisRs750cror
e,f
indout

191
 av
eragepr
opensi
tyt
osav
e.

Q.
3. Fi
ndconsumpt
ion© i
fb–0.
8andi
ncome(
Y)i
s200
and=100

Q.
4. Fi
ndsavi
ngsifautonomousconsumpti
onisRs.60
andMPC=0.5atRs.5000lev
elofi
ncome.

Q.
5. Cal
cul
ateAPCandAPSf
rom t
hef
oll
owi
ngschedul
e:.

I
ncome Consumpt i
onC APC APS
100 80 - -
200 120 - -
300 180 - -

Q.
6. Calcul
ateAPCandAPSf
rom t
hef
oll
owi
ng
i
nformation:

I
ncome Consumpt i
onC APC APS
100 60 - -
400 120 - -
1000 240 - -

Q.
7. Compl
etet
hef
oll
owi
ngt
abl
e:

Lev
elofI
ncome Consumpt i
on MPC MPS
(Rs.
) Expendi
tur
e(Rs.)
400 240 - -
500 320 - -
600 365 - -
700 463 - -

Q.
8. Compl
etet
hef
oll
owi
ngt
abl
e:

Lev
elofI
ncome Consumpti
on MPC MPS
(Rs.
) Expendi
tur
e(Rs.
)

192
 100 100 - -
200 190 - -
300 275 - -
400 355 - -
Q.
9. Compl
etet
hef
oll
owi
ngtabl
e:

Lev
elofI
ncome Consumpt i
on MPC MPS
(Rs.
) Expendi
tur
e(Rs.
)
300 300 - -
400 375 - -
500 445 - -
600 510 - -

Q.
10. Calcul
ate mar
ginalpr
opensi
tyt
o sav
efr
om t
he
fol
l
owingdata:
(Ans.MPS0.5)

I
ncome(
Rs.
) Consumpt
ionExpendi
tur
e(Rs.
)
2,
000 300
4,
000 1,
300

Q.
11. Fr
om t
het
abl
egi
venbel
ow,
findoutAPCandMPC:

I
ncome(
Rs.
) Consumpt
ion(
Rs.
) APC MPC
50 40 - -
100 65 - -
150 75 - -

Q.
12 Calcul
ate MPC and MPS f
rom t
he f
oll
owi
ng
i
nformati
on:

I
ncome(
Rs.
) 150 200

193
Consumpt
ion(
Rs.
) 130 170

Q.
13. Compl
etet
hef
oll
owi
ngt
abl
e:

Lev
elofI
ncome Consumption Marginal Marginal
Expendi
tur
e( Rs.
) Pr
opensit
yto Pr
opensit
yto
Consume Save
400 240 - -
500 320 - -
600 395 - -
700 465 - -

Q.
14. Cal
cul
ateMPCandMPSf
rom t
hef
oll
owi
ngt
abl
e:

I
ncome(Rs.) 0 100 200 300 400
Consumpt
ion(Rs.
) 50 100 140 170 190

Q.
15. Compl
etet
hef
oll
owi
ngt
abl
e:

I
ncome Sav
ing(
Rs.
) MPC MPS
(
Y)
0 -
12 - -
20 -
6 - -
40 0 - -
60 6 - -

Q.
16. Compl
etet
hef
oll
owi
ngt
abl
e:

Lev
elofIncome Consumpti
on Marginal Marginal
(
Y)(Rs.) Expendi
tur
e(C) Pr
opensit
yto Pr
opensit
yto

194
 (
Rs.
) Consume Save
1,
000 900 - -
1,
200 1,
060 - -
1,
400 1,
210 - -
1,
600 1,
350 - -

Q.
17. Compl
etet
hef
oll
owi
ngt
abl
e:

Lev
elofIncome Consumption Marginal Mar gi
nal
(
Y)(Rs.) Expendit
ure(C) Pr
opensit
yto Pr
opensit
yto
(Rs.) Consume Save
500 400 - -
600 480 - -
700 550 - -
800 615 - -

Q.
18. Compl
etet
hef
oll
owi
ngt
abl
e:

I
ncome Sav
ing(
S) MPC APS
(
Y)
0 -
90 - -
100 - 0.
6 -
200 - 0.
6 -
300 - 0.
6 -

Q.
19. Fi
ndoutAPCandAPSf
rom t
hef
oll
owi
ngt
abl
e:

I
ncome Consumpti
on
(Rs.
) (Rs.
)

195
 50 30
100 70
150 120
200 780

Q.
20. Compl
etet
hef
oll
owi
ng:
-

I
ncome(Rs.
) Sav
ing MPC APC
0 -20 - -
50 -10 - -
100 0 - -
150 30 - -
200 60 - -

Q.
21.Compl
etet
hef
oll
owi
ng:
-

I
ncome(Rs.
) Consumpt i
o MPS APS
n
expendit
ure
(Rs.
)
0 80 - -
100 140 0.
4 -
200 - - 0.
- 240 - 0.
20
- 260 0.
8 0.
35

Q.
22. Compl
etet
hef
oll
owi
ngt
abl
egi
vent
hatC=50+0.
5Y:
-

196
 I
ncome(Rs.
) C APC APS MPC
0
100
200
300
400
500

Q.
23.I
fval
ueofMPSis0.
25,whati
st heval
ueofmult
ipl
i
er?
Q.
24.I
fval
ueofMPCi
s0.
8,fi
ndoutv
alueofmult
ipl
i
er(
K)

Q.
25. I
naneconomyi nvestmentincr
easesbyRs.10crore.
Asaresul
t,i
ncomei ncr
easeby`50Crore,
Whatisthe
val
ueofmulti
pli
er.

Q.
26. Calcul
atechangeinincomewhenMPC =0.
8 and
changeini
nvestment=`
.1000.

Q.
27. In an i
ncr
ease of`.10000 ininvest
menti
n an
economyresul
tinanincr
easei
nincomeof`40000,
cal
culat
eMPSintheeconomy.

Q.
28 MPCi naneconomyi
s0.8.I
finv
est
mentisincreased
by Rs.5 cror
e,how much woul
d be i
ncrease in
i
ncome?

Q.
29. I
faneconomyMPCi s0.8andinv
estmenti
ncreased
by`
.1000cr
ore,
cal
cul
atetot
ali
ncr
easeini
ncome.

Q.
30. I
naneconomy ,i
nvest
mentexpendi
tureisincr
eased
byRs.
700 cror
e and MPC is 0.9.Calculatetotal
i
ncreasei
ncomeandconsumptionexpendi
ture.

Q.
31 I
fMPCi
s0.
9andi
ncr
easei
ninv
est
menti
sofRs.
100

197
 cr
ore,
findouti
ncr
easei
nnat
ional
income.

Q.
32. I
naneconomyinvestmenti
ncr
easesbyRs.120cr
ore.
Thev
alueofmult
ipl
ieri
s4.Cal
cul
ateMPC.

Q.
33. Rs.200cr or
eincr
easei
ninvest
mentleadst
oari
sein
nati
onalincomebyRs.1000crore.Fi
ndoutmar
ginal
propensi
tytoconsume(MPC)

Q.
34. Asar esul
tofincr
easeininv
est
mentbyRs.125cror
e,
nat
ionalincomeincreasebyRs.500cr
ore.Cal
cul
ate
MPC.

Q.
35. I
naneconomyani ncr
easeininvest
mentl
eadst
oan
i
ncr
easein nat
ionali
ncomet hreetimemorethan
i
ncr
easei
ninvestment
.Cal
culat
eMPC

Q.
36. Inaneconomy ,marginalpropensit
yt oconsumeis
0.75.I
finvest
ment expendi tureisincr
easedbyRs.
500crore,cal
culat
ethet ot
ali ncr
easeinincomeand
consumptionexpendi
ture.

Q.
37. I
naneconomy ,i
nvestmentexpendi t
urei
sincr
easeby
Rs.
400croreandmar ginalpropensi
tytoconsumeis
0.
8.Cal
culat
etot
alincreaseinincomeandsavings.

Q.
38. Asar esul
tofincreaseininvest
mentbyRs.1250
cr
ore,nat i
onali
ncomei ncr
easedbyRs.5000cr
ore.
Cal
culateMPC.

Q.
39. Anincr
easeofRs.
200cr
orei
ninvest
mentl
eadst
oa
ri
seinnati
onali
ncomebyRs.1,
000cror
e,fi
ndout
MPC.

Q.
40. An incr
easeofRs. 250 cr
oresininvestmenti
n an
economyr esul
tedint ot
alincr
easeinincomeofRs.
1000 cror
e.Cal cul
atethe fol
lowi
ng :(a)MPC (b)

198
 Change in savi
ngs (
c) Change i
n consumpt
ion
expendi
tur
e(d)Val
ueofmult
ipl
i
er.

Q.
41. I
fmarginalpr
opensi
tytoconsumei s0.
9,whatisthe
v
alueofmul t
ipl
i
er?Howmuchi nvestmentisneeded,
i
fnati
onali
ncomeincreasedbyRs5000cror
e?

Q.
42.
(i
)How muchi sthemar
ginalpr
opensit
ytoconsumei
n
aneconomyinwhi
chthemarginalpr
opensi
tyt
osav
e
i
s0.3

(
ii
)How much ist he mar
ginalpr
opensi
tyto sav
ein
economywher
et hemar
ginalpr
opensi
tyt
oconsume
i
s0.8?

Q.
43. Fi
ndoutt
hev
alueofmul
ti
pli
er,
whenMPCi
s0.
75.

Q.
44. Fi
ndoutt
hev
alueofmul
ti
pli
er,
whenMPS=0.

Q.
45. I
naneconomyi nv
estmentincr
easesbyRs.10cror
e.
Asar esul
tincomeincreasebyRs.50Cr
ore.Whatis
thev
alueofthemulti
pli
er?

Q.
46. Fi
ndoutt
hesi
zeofmul
ti
pli
er,
whenMPC=0.
9

Q.
47. Fi
ndoutt
hemul
ti
pli
er,
whenMPS=0.
4

Q.
48. Fi
ndoutt
hemul
ti
pli
er,
whenMPS=0.
8

Q.
49. I
finvestmentmult
ipl
i
eri
s1,whatwi
l
lbet
hev
alueof
marginalpr
opensi
tyt
oconsume?

Q.
50. How muchaddit
ionali
ncomewi l
lbegener
atedi
nan
economywi
thadditi
onali
nvest
mentofRs.100cror
e,
whenMPC=1/ 2?

Q.
51. (
i)Ift
heval
ueofmul
ti
pli
eri
s4whatwi
l
lbeMPC
andMPS?

199
 (
ii
) Whatwil
lbe marginalpr
opensi
tyto consume
whenmar
ginal
propensi
tyt
osaveis0.
2?

(
ii
i) Whatincr
easeini
nvest
mentisneededt
orai
se
incometoRs.2,
000cr
oreifMPS=0.5?

Q.
52. How muchaddi
ti
onalincomewillbegener
atedi
nan
economywi
thaddit
ionalinv
est
mentofRs.100cror
e,
andwhenMPC=?

Q.
53. Inaneconomymar ginalpropensi
tyt oconsumeis
0.75.I
finv estmentexpendit
ureisi ncr
easedbyRs.
500crore,calcul
atethetotali
ncreaseinincomeand
consumptionexpenditur
e.

Q.
54. Inaneconomyinvest
mentexpendi
tur
eisincr
eased
byRs400croreandmargi
nalpr
opensi
tyt
oconsume
i
s0. 8.Cal
cul
atethetot
alincr
easeinincomeand
savi
ng.

Q.
55. Inaneconomyi nvest
mentexpendi tur
eisi ncr
eased
byRs.700crore.Marginalpropensi
tytoconsumei s
0.9.Cal
culat
et he totalincrease inincome and
consumpt
ionexpendit
ure.

Q.
56. Inaneconomy ,t
hemar ginalpropensi
tyt
oconsume
i
s0. 75.Investmentisi ncr
easedbyRs.200cr ore.
Calcul
ate t he total increase in income and
consumptionexpendit
ure.

Q.
57. Inaneconomy ,t
he mar ginalpropensi
tytoconsume
i
s0. 95.Investmentisi ncreasedbyRs.100cr ore.
Calcul
ate t he total increase i n income and
consumptionexpendit
ure.

Q.
58. I
naneconomy,t
hemar
ginalpropensi
tyt
oconsume
i
s 0.
8.I
nvest
menti
sincreased byRs.500 cror
e,

200
 cal
culat
e t he tot
al incr
ease i
n i
ncome and
consumpti
onexpendi
tur
e.

Q.
59. Inaneconomy,i nvestmentisi ncr
easedbyRs.500
crore.I
fthemar ginalpropensit
ytoconsumei s0.
6.,
calcul
ate the t otal i ncr
ease in i ncome and
consumptionexpenditure.

Q.
60. An i ncr
ease ini nvest
mentleads totot
alr i
se in
nationalincome by Rs.500 cr ores.If margi
nal
propensit
yt oconsumei s0.
9,whatisthei
ncreasein
i
nv estment?Calculat
e.

Q.
61. Asa r esul
tofincrease ininvest
mentbyRs.125
cr
ores,nati
onali
ncomei ncreasesbyRs.500 cr
ore.
Cal
culatemargi
nalpropensi
tytoconsume.

Q.
62. Asar esul
tofi
ncr
easeininvestmentnat
ionalincome
ri
ses by Rs.
600 cr
ores.Ifmar gi
nalpropensityto
consume i s 0.
75, calculat
e t he increase in
i
nvestment.
.

Q.
63. I
fmar ginalpr
opensit
ytoconsumei s0.
9,whati
st he
val
ueofmul t
ipl
i
er?How muchi nv
estmenti
sneeded
toincrease nati
onalincome byRs.5,000 cr
ores?
Cal
culate.

Q.
64. Gi
venmar gi
nalpropensi
tytosav eequalt
o0.25,
what
wi
llbet hei
ncreaseinnationalincomeifinv
est
ment
i
ncreasesbyRs.125crores.Calculat
e.

201
Q.
65. Iti
splannedtoincreasenat i
onalincomebyRs.1, 000
cror
e.Howmuchi ncreaseininvestmentisr
equiredto
achi
evet hi
sgoal?Assumet hatmar gi
nalpropensit
y
toconsumei s0.
6.Cal cul
ate.

Q66. Anincreaseininvest
mentbyRs.400croresl
eadsto
i
ncr
ease i n nati
onalincome by Rs.1,
600 cr
ores.
Cal
culatemar gi
nalpr
opensi
tyt
oconsume.

Q67.(
i)Ift
hevalueoft
hemul
ti
pli
eri
s4,
whatwi
l
lbe(
a)MPC
and(b)MPS?

(
ii
)Whatincr
easeininvestmenti
sneededtor
aiset
he
i
ncomebyRs.
1,000cror
esifMPCi
s0.75?

(
ii
i)Whati
sthev al
ueofMPCifanaddit
ionali
nvest
ment
ofRs.
40croresleadst
oanincreaseinincomeby
Rs.
100cr
ores?

Q68. Cal
cul
atet
heamountofnewi
nvest
mentwhen

si
zeofmul
ti
pli
er(
k)=2.
5and

(
ii
) i
ncr
easei
nincome=Rs.
500

Q69. Cal
cul
atet
hechangei
nthei
ncomewhen,

MPC=0.
8

(
ii
) Changei
ninv
est
ment=Rs1,
000cr
ores

Q70. If an i
ncrease of Rs.10,000 i
nvestment i
n an
economyr esul
tsinanincr
easeinani ncomeofRs.
40,
000calculat
eMPSi naneconomy?

202
Q71. MPC in an economy is 0.
8.Int
his economy
,if
i
nvestmentisincr
easedbyRs.5cr
ores,how much
wouldbethei
ncreasei
nincome?

Q72. Inaneconomy ,t
hemar gi
nalpr
opensit
ytoconsume
i
s0. 75.Inthi
seconomy,whatwi
llbetheef
fectonthe
totalincome,iftheinv
estmentincr
easebyRs. 300
crores?

Q73. Ifi
naneconomy ,i
nvestmenti
ncr
easesf rom Rs.
1,000
cror
est
oRs.1, 200cr or
esandasar esultofittotal
i
ncomeincr
easedbyRs.800cr or
es,calculat
eMPS.

Q74. Inaneconomymar gi
nalpropensi
tytoconsumeis
0.75.I
fi nvest
mentexpendit
ureisincr
easedbyRs.
500crores,cal
cul
atethetot
alincr
easei
nincomeand
consumpt i
onexpendi
tur
e.

Q75. Inaneconomyinvestmentexpendit
urei sincreased
by Rs. 400 cr
ores and marginalpr opensityt o
consumeis0.
8.Calcul
atet
hetot
alincreaseinincome
andsavi
ngs.

Q76. I
fmar gi
nalpr
opensi
tytosav
ei s0.1andincr
easein
nat
ionali
ncomeisRs.500cror
es,cal
cul
ateincr
ease
i
nvestment
.

Q77. Byincreasei
ninvestmentofRs. 100cror
es,nati
onal
i
ncomeofacount ryincreasedbyRs.250cror
es.Find
outthemargi
nalpropensit
ytoconsume.

Q78. I
fmarginalpropensityt
osav eis0.
2,how muchnew
i
nvest
menti srequiredtomaket henati
onali
ncome
r
isebyRs.600crores?Calcul
ate.

Q79. Gi
venmarginalpr
opensi
tyt
osav e0.
25,whatwil
lbe
t
he incr
ease in nati
onal i
ncome ifinvest
ment

203
 i
ncr
easedbyRs.
125cor
es.Cal
cul
ate.

Q80. I
naneconomyS=-50+0. 5Yi sthesavi
ngfunct
ion
(
where S= savi
ng and Y= nati
onalincome)and
i
nvest
mentexpendi
tur
eis7,
000.
Calcul
ate:

(
i) Equi
l
ibr
ium l
evel
ofnat
ional
income.

(
ii
) Consumpti
on expendi
tur
e at equi
l
ibr
ium l
evelof
nat
ional
income.

Q81. C=100+0. 75Yi

saconsumptionf
unct
ion(whereC=
consumpti
onexpendi
tureandY=nationalincome)
andinvest
mentexpendi
tur
eis800.Onthebasi sof
thi
sinf
ormati
oncal
culat
e.

(
i) equi
l
ibr
ium l
evel
ofnat
ional
income.

(
ii
) sav
ingatequi
l
ibr
ium l
evel
ofnat
ional
income.

Q82. Given bel

ow i
sthe consumpt
ion f
unct
ion i
n an
economy :

C=100+0.
5Y

Wit
ht hehel
pofanumeri
calexampl
eshow shati
n
t
hiseconomyasi
ncomei
ncr
easeAPCwil
ldecr
ease.

Q83. Thesav i
ngfuncti
onofaneconomyi sS=-200+
0.25Y.Theeconomyisinequi
l
ibr
ium wheni
ncomei
s
equalto2,
000.Cal
cul
ate.

I
nvest
mentexpendi
tur
eatequi
l
ibr
ium l
evel
ofi
ncome.

Aut
onomousconsumpt
ion.

I
nvest
mentmul
ti
pli
er.

Q84. I
naneconomy
,75percentoft
hei
ncr
easei
nincome

204
 i
sspentonconsumption.Inv
est
menti
sincr
easedby
Rs.
1,000cr
ore.Cal
cul
ate.

t
otal
incr
easei
nincome.

t
otal
incr
easei
nconsumpt
ionexpendi
tur
e.

Q85. Inaneconomyt heequil

ibr
ium levelofincomeisRs.
12,000crore.Therati
onofmar gi
nalpropensi
tyto
consume and mar gi
nal propensity to save is
3:1.Cal
cul
atethe addi
ti
onalinv estmentneeded to
reachanewequi l
i
bri
um lev
elofi ncomeofRs.20,000
crore.

Q86. Inaneconomytheconsumptionf
uncti
onisC=500+
0.75YwhereCisconsumpt i
onexpendit
ureandYis
i
ncome.Calcul
atet
heequil
ibr
ium l
evelofi
ncomeand
consumpti
on expendi t
ure when i nv
est
ment
expendi
tur
eis5,
000.

Q87. Inaneconomytheconsumpt i
onf
uncti
onisC=600+
0.9YwhereC isconsumptionexpendi
tur
eandYi s
i
ncome.Calcul
atet
heequil
ibri
um l
evelofi
ncomeand
consumpti
on expendi t
ure when i nv
est
ment
expendi
tur
eis500.

Q88. Inaneconomytheconsumpt i
onf
uncti
onisC=500+
0.8YwhereC isconsumptionexpendi
tur
eandYi s
i
ncome.Calcul
atet
heequil
ibri
um l
evelofi
ncomeand
consumpti
on expendi t
ure when i nv
est
ment
expendi
tur
eis500.

Q89. Given thatnationali

ncome is Rs.80 crore and
consumpt i
on expendi
tur
e Rs.64 cr ore,fi
nd out
averagepropensit
ytosave.Whenincomeri
sestoRs.
100 croreand consumpt i
onexpendit
ureto Rs.78

205
 cror
e,what wil
lbe the average pr
opensit
y t o
consumeandthemar
ginal
propensi
tytoconsume?

Q90. Inaneconomyt hemar gi

nalpr
opensi
tytosav
ei s0.
4.
Nati
onalincomei stheeconomyincr
easebyRs.200
cror
eisar esul
tofchangei sinv
est
ment.Calcul
ate
thechangeisinvest
ment.

Q91. Asar esultofincr

easeininvest
mentbyRs.60cror
e,
nat
ionalincome r i
ses byRs.240 cror
e.Calcul
ate
marginalpropensi
tytoconsume.

Q92. An economy i si n equi

li
bri
um.It
s consumpt
ion
funct
ionisC=300+0. 8ywhereCisconsumpt
ion
expendit
ureandYi sincomeandinvest
mentisRs.
700.Findnat
ional
income.

Q93. An economy is in equili

bri
um. The economy ’s
consumpti
onfunct
ionisC=100+0. 5Ywher eCi s
consumpti
onexpendi
tur
eandYi snat i
onalincome.
Nati
onal i
ncome is 1,000. Fi
nd out investment
expendi
tur
eint
heeconomy .

Q94. Aneconomyi sinequi

li
bri
um.Itsnat
ionali
ncomeis
Rs.5,
000andautonomous consumpt
ionexpendi
tur
e
i
sRs.500.Whatisthetot
alconsumpt
ionexpendi
tur
e
i
fmarginal
propensi
tyt
oconsumeis0.7?

Q95. InaneconomyS=- 500+0.5Yisthesavingfunct

ion
andinv
estmentexpendi
tur
eisRs.7000.Calcul
ate:

(
i) Equi
l
ibr
ium l
evel
ofi
ncome

(
ii
) Consumpt
ionatequi
l
ibr
ium l
evel
ofnat
ional
income.

Q.
96. I
naneconomy
,lev
elofi
ncomei
sRs.2000cr
oreand

206
 MPC=0. 75.Calcul
atet
otali
ncomei
finv
est
menti
s
i
ncr
easedbyRs.200cror
e.

Q.
97. Inaneconomy ,theactuall
evelofi
ncomei sRs.
500
croreswhereasf
ullemploymentofYisRs.800cr
ore.
MPC = 0. 75.Calcul
ate how much inv
estmenti s
requir
ed t
o achievefullemploymentlevelinthe
economy.

Q.
98. Fr
om t
hedatagivenfi
ndoutwhet
hert
heeconomyi
s
i
nequi
li
bri
um ornot
?Why?

I(
Aut
onomousI
nvest
ment
) = Rs.10cr
ores

C = 40+0.
8Y

Y(
Lev
elofI
ncome) = Rs.200cr
ores

Q.
99. From the f
oll
owi
ng data,f i
nd out whet
her the
economyisi
nequi
li
bri
um ornot: Y = Rs. 250
cror
es,I(
Aut
onomousinv
estment)=Rs.
10crores

C(Aut
onomousconsumpt
ion)=Rs.40cr
ores,
MPC=
0.
8

207