Advertisements
Advertisements
Question
If MPC = 1, the value of the multiplier is ______
Options
0
1
Between 0 and 1
Infinity
Advertisements
Solution
If MPC = 1, the value of the multiplier is Infinity.
Explanation:
The value of the multiplier is `1/(1 - "MPC")`
where
MPC = Marginal propensity to consume
Given that
MPC = 1
= `1/0` = ∞
Thus, the value of multiplier becomes infinity.
APPEARS IN
RELATED QUESTIONS
What is the relation between marginal propensity to consume and multiplier?
Calculate the marginal propensity to consume if the value of 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
Suppose in an economy, the initial deposits of ₹ 400 crores lead to the creation of total deposits worth ₹ 4000 crores.
Under the given situation the value of reserve requirements would be ____________.
Keynesian multiplier establishes a relationship between ______
The value of Keynesian Investment Multiplier depends on ______
Discuss the mechanism of investment multiplier with the help of a numerical.
The formula of investment multiplier in terms of MPS is (1)
The value of multiplier is ______
For a hypothetical economy, assuming there is an increase in the marginal Propensity to Consume (MPC) from 75% to 90% and change in investment to be ₹ 1,000 crore.
Using the concept of investment multiplier, calculate the increase in income due to change in Marginal Propensity to Consume (MPC).
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.
If a linear consumption curve takes a parallel shift downwards, the value of investment multiplier will ______.
Explain the concept of Investment Multiplier using a diagram.
Mention any one difference between Induced investment and Autonomous investment.
