Economics

Investment multiplier

In Class 12 Economics, Investment Multiplier explains how a change in autonomous investment can cause a larger change in national income and employment within the framework of Determination of Income and Employment. Students learn the multiplier process through successive rounds of consumption and income generation, understand the relationship k = 1/(1 − MPC) or k = 1/MPS, and solve numerical problems using the marginal propensity to consume or save. The topic also highlights the assumptions and limitations of the simple multiplier model.

Hard · Level 1 · 1 questions

Practice questions

01The multiplier idea explains which macro relation?

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Answer and explanation

Correct answer: A. An initial spending change can cause a larger change in income

The multiplier describes how an initial autonomous change in expenditure can generate repeated rounds of income and consumption, causing total national income to change by more than the original spending change. Its size depends partly on the marginal propensity to consume; a higher MPC generally produces a larger multiplier. Therefore, option A is correct.

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Investment multiplier

Practice questions

01The multiplier idea explains which macro relation?multiplier विचार किस समष्टि संबंध को स्पष्ट करता है?

Analytics choices

01The multiplier idea explains which macro relation?