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For a hypothetical… (Class 12 Economics SQP 2023-24, Q13)

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EconomicsCBSE Class 12 · Sample paper, session 2023-24 · 4 marks · Very short answer

CBSE Class 12 Economics sample paper 2023-24: question 13

From the official CBSE sample question paper for 2023-24, section A, question 13, for 4 marks. Try it first; the hints and our step-by-step solution are below.

Q13 · 4 marks · Very short answerDetermination of Income and Employment

For a hypothetical economy, the government incurs an investment expenditure of ₹ 1,000 crore. If the value of Marginal Propensity to Save (MPS) falls from 0.25 to 0.10.
Calculate the value of increase in income due to change in the value of Marginal Propensity to Save (MPS).

Source: official sample paper from cbseacademic.nic.in (PDF). See it in the full Sample paper 2023-24.

Hints

Open one hint at a time and try again before the next.

Hint 1

k = 1/MPS.

Hint 2

Find the income change under each MPS, then subtract.

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. When MPS = 0.25: k = 1/MPS = 1/0.25 = 4, so ΔY = k × ΔI = 4 × 1,000 = ₹ 4,000 crore.

    1½ marks

  2. When MPS = 0.10: k = 1/0.10 = 10, so ΔY = 10 × 1,000 = ₹ 10,000 crore.

    1½ marks

  3. Increase in income due to the fall in MPS = 10,000 − 4,000 = ₹ 6,000 crore.

    1 mark

Answer: Income rises by ₹ 6,000 crore more (₹ 10,000 crore instead of ₹ 4,000 crore).

Where the marks are

  • Multiplier and income at MPS 0.25 (1½)
  • Multiplier and income at MPS 0.10 (1½)
  • Difference (1)

Revise the chapter

Practise this chapterBoard-style questions from Determination of Income and Employment, one at a time, marked against the answer key and marking points.Back to the full paperSample paper 2023-24: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.