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I recently encountered upon this question:

Suppose, in an economy,autonomous consumption is Rs 100 crore and autonomous investment is Rs 60 crore. Imagine that in this economy,with every increase in income 80 °/° of it is spent on consumption . If the full employment level of income is Rs 1000 crore,what will be the additional investment?

So, the MPC is 0.8 and so the multiplier would be 5 times. The consumption function is C = Autonomous consumption + MPC.y Hence, C = 100 + (0.8)1000 = 900 crore. But then given that the multiplier is the ratio change in income to change in investment, how to proceed further?

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I think you use the inverse (1-MPC) of the MPC to derive the marginal propensity to save (MPS) and create the investment function. So, I= 60 + .2*1000 = 260, or an additional 200 from the autonomous level.

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