Question

According to Keynes, what is the investment (income) multiplier?

Options

• Ratio of change in consumption to change in income

• Ratio of final total increase in income to initial increase in investment

• Ratio of total saving to total income

• Ratio of government expenditure to private expenditure

Answer 1

Because one person’s expenditure becomes another person’s income

Explanation:

Keynes extended Kahn’s idea to income and defined the investment multiplier as the ratio of the total increase in income to the initial increase in investment.