Suppose in a hypothetical economy ,the income rises from ₹5000 crores to ₹6000 crores. As a result, the consumption expenditure rises from ₹4000 cores to ₹4600 crores. Then what will be the marginal propensity to consume?

Option 1: 0.8 -> This would mean 80% of additional income is consumed, but calculation shows otherwise.

Option 2: 0.4 -> This would mean 40% of additional income is consumed, which is incorrect.

Option 3: 0.2 -> This would mean only 20% of additional income is consumed, which is too low.

Option 4: 0.6 -> This is correct as MPC = Change in Consumption/Change in Income = (4600-4000)/(6000-5000) = 600/1000 = 0.6.

Hence, Option 4: 0.6 -> Marginal Propensity to Consume (MPC) is calculated as the ratio of change in consumption to change in income. Here, when income increases by ₹1000 crores (from ₹5000 to ₹6000), consumption increases by ₹600 crores (from ₹4000 to ₹4600). Therefore, MPC = 600/1000 = 0.6, meaning 60% of the additional income is spent on consumption while 40% is saved. -> correct