For a hypothetical economy, assume the government increased an infrastructural investment by ₹ 10,000 crore. 80% of additional income is consumed in…

Given, ΔI = ₹ $\displaystyle 10,000$ croreMarginal Propensity to Consume (MPC) = $\displaystyle 80$% of additional income consumed i.e. $\displaystyle 0.8$As we know,K = $\displaystyle \dfrac{1}{1-\text{MPC}}$$\displaystyle = \dfrac{1}{1-0.8} = 5$Increase in Income (ΔY) = K x ΔI= $\displaystyle 5$ x $\displaystyle 10,000$= ₹ $\displaystyle 50,000$ croreMPC = $\displaystyle \dfrac{\Delta C}{\Delta Y}$$\displaystyle 0.8 = \dfrac{\Delta C}{50,000}$ΔC = ₹ $\displaystyle 40,000$ crore