Question

Calculate the value of multiplier if the entire increase in income is saved

Answer 1

Answer: The level at which the economy is in equilibrium, i.e., where aggregate demand = aggregate supply, is called effective demand. Under fixed price model, the value of planned (ex-ante) aggregate demand for final goods AD is equal to ex-ante consumption plus ex-ante investment expenditure....

Answer 2

if entire increase in income is saved then the value of the multiplier is equal to the percentage of increase of the income

Explanation:

• the value of multiplier can be defined as the rate in which the savings is increased. If the entire increase in the income is saved then there will be a complete increase in the percentage of the increased salary.
• As a result of this the value of  the increase in income will be equal to the multiplier