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प्रश्न
How is the investment multiplier related to marginal propensity to consume?
How is the multiplier related to marginal propensity to consume?
Briefly explain how investment multiplier is related to Marginal Propensity to Consume (MPC).
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उत्तर
The investment multiplier is given by the formula
K = `1/(1 - MPC)`
= `1/(1 - c)`
where C is the marginal propensity to consume (MPC).
This means the multiplier’s value depends directly on the MPC. The greater the MPC, the higher the multiplier, and the lower the MPC, the smaller the multiplier.
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संबंधित प्रश्न
Define multiplier
If MPC = 1, the value of the multiplier is ______
If MPC = 0, the value of the multiplier is: (Choose the correct alternative)
a. 0
b. 1
c. Between 0 and 1
d. Infinity
Calculate the marginal propensity to consume if the value of multiplier is 4.
Define investment multiplier.
Explain the relationship between the investment multiplier and marginal propensity to consume.
If in an economy :
Change in initial Investments (∆I) = ₹ 500 crores
Marginal Propensity to Save (MPS) = 0.2
Keynesian multiplier establishes a relationship between ______
Keynes derived Investment Multiplier from Kahn’s ______
Discuss the mechanism of investment multiplier with the help of a numerical.
The formula of investment multiplier in terms of MPS is (1)
Which of the following statements is true?
For a hypothetical economy, assuming there is an increase in the Marginal Propensity to Consume (MPC) from 80% to 90% and change in investment to be ₹ 1000 crore.
Using the concept of investment multiplier, calculate the increase in income due to change in Marginal Propensity to Consume.
For a hypothetical economy, assuming there is an increase in the Marginal Propensity to Consume from 80% to 90% and change in investment to be ₹ 2000 crore.
Using the concept of investment multiplier, calculate the increase in income due to change in Marginal Propensity to Consume.
Explain the concept of Investment Multiplier using a diagram.
