Question

assuming thatthe increase in investment rs 1000 cr and maeginal propensiry yo consume is 0.9 ecplin the working of multiplier​

Answer 1

ANSWER:

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EXPLANATION:

Assuming that increase in investment is Rs. 1,000 crore and marginal propensity to consume is 0.9, explain the working of multiplier.

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ANSWER

Multiplier(k) => Change in income / 1,00 = 1/ (1-MPC)

=> Change in income / 1,000 = 1/ (1- 0.8)

=> Change in income / 1,000 = 1/ 0.2

=> change in income = 5 (1,000) = 5,000 crores

K= change in income/ change in investment = 5,000 /1,000 = 5 times

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