1.The slope of the production possibility curve is the

A. Marginal rate of exchange
B.Margial rate of substitution
C. Average rate of transformation
D. Marginal rate of transformation ✓
Ans: D

2.

Solution :
5Q2+20Q+20
MC= ∆C/∆Q
5×2Q+20
MC=10Q+20......(1)
P=100-3Q.....(2)
TR=PQ
TR=(100-3Q)Q {P=100-3Q}
TR= 100Q-3Q×Q
MR= 100-6Q ....(3)
MC=MR
10Q+20100-6Q
10Q+6Q=100-20
16Q=80
Q=80/16
Q=5
From (2). P=100-3Q
P=100-3(5)
P=100-15
P=85

MPC= Marginal propensity to consume

MPS= Marginal propensity to save

I= investment

∆I= Changed Investment

S= Saving

∆S=Changed Saving

K= Keynes Multiplier

C= Consumption

Y=Income

MPC+MPS=1

MPS=1-MPC---(1)

K= 1/1-MPC or

K= 1/MPS----- ( From-- 1)

∆Y= K.∆I ( K = Keynes Multiplier)

K∆I= ∆Y

K= ∆Y/∆I

S=Y-C

Saving = Income - Consumption

∆S=∆Y - ∆C ---(2)

∆S=∆I---- (3)

K= ∆Y/∆I

K= ∆Y/∆S ----(from 3)

K=∆Y/(∆Y - ∆C) -----( from 2)

Dividing on Numerator and Denominator by ∆Y

K= (∆Y/∆Y)÷(∆Y - ∆C)/∆Y

K= 1÷(∆Y/∆Y -∆C/∆Y)

K= 1÷(1 - ∆C/∆Y)

K =1/1-MPC. ----- ( ∆C/∆Y=MPC)

K= 1/MPS -------- ( 1-MPC= MPS)