Question

Explain the working of multiplier and indicate its importance

Answer 1

Answer:

Multiplier is the ratio of the final change in income to the initial change in investment. K = ∆Y/∆I, i.e., K (multiplier) is equal to the ratio of the increase in income to the increase in investment, which is responsible for the rise in income. ADVERTISEMENTS: Thus, if investment in the economy increases by Rs.