If investment increases from 400 to 600 and income increases from 3,000 to 4,000

Question

If investment increases from 400 to 600 and income increases from 3,000 to 4,000, the MPS should be equal to

Options:

A . 0.1

B . 0.2

C . 0.3

D . 0.4

Answer: Option B
:
B
Multiplier (M) =

\frac{Δ Y}{Δ A}

\frac{(4000 - 3000)}{(600 - 400)}

= 5
MPS =

\frac{1}{M}

\frac{1}{5}

= 0.2

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