Investment Multiplier

Let’s assume the Marginal Propensity to Consume (MPC) is 0.75, and the initial increase in investment is ₹ 200 crore. The formula for the multiplier effect is: Substituting the given MPC value: Now, we calculate the final income increase (ΔY) as follows: Thus, the final increase in income in the economy is ₹ 800 crore. This shows how an initial investment of ₹ 200 crore can lead to a larger increase in the overall income of the economy due to the multiplier effect.

\text{The options provide the constant term as } -60.
\text{So, the relevant saving function is: } S = -60 + 0.20Y.