Question

In the investment multiplier formula, ΔY denotes:

Options

• The marginal propensity to consume

• The total increment in equilibrium value of final goods output (national income)

• The initial increment in autonomous expenditure

• The change in aggregate savings

Answer 1

ΔY is the total increase in the equilibrium value of final goods output, which (since national income equals the aggregate value of final goods output) is also the total increase in national income. It forms the numerator of the multiplier ratio.