Advertisements
Advertisements
Questions
Define multiplier.
Give atleast two definitions of multiplier.
Advertisements
Solution 1
- The multiplier is defined as the ratio of the change in national income to the change in investment.
- If AI stands for increase in investment and AY stands for resultant increase in income, the multiplier K = `"AY"/"AI"`.
- Since AY results from AI, the multiplier is called investment multiplier.
Solution 2
According to Keynes, “Investment multiplier tells us that when there is an increment in aggregate investment, income will increase by an amount that is K times the increment of investment.”
According to Prof. Dillard, “Investment multiplier is the ratio of increase in income to a given increase in investment.”
Notes
Students should refer to the answer according to their questions.
APPEARS IN
RELATED QUESTIONS
The multiplier tells us how much _______changes after a shift in _____.
The multiplier is calculated as______.
It the MPC is 0.5, the multiplier is _________.
In an open economy import _________ the value of the multiplier.
The term super multiplier was first used by ______.
Mention the differences between accelerator and multiplier effect.
State the concept of the super multiplier.
Specify the limitations of the multiplier.
Illustrate the working of the multiplier.
Who first introduced the concept of the employment multiplier?
What does the employment multiplier measure?
According to Keynes, what is the investment (income) multiplier?
In the numerical example, investment rises by ₹5 crores and income finally rises by ₹20 crores. What is the value of the multiplier?
Why does the multiplier process lead to a manifold increase in income?
