Question

In the investment multiplier formula, ΔĀ represents:

Options

• The total change in consumption expenditure

• The marginal propensity to save

• The change in equilibrium national income

• The initial increment in autonomous expenditure (e.g., ΔĪ)

Answer 1

ΔĀ stands for the initial increase in autonomous expenditure, such as an autonomous increase in investment (ΔĪ). This is the first-round injection whose effects are magnified through the multiplier into the total income change ΔY.