How an initial increase in investment affects the level of final income of the economy? Show its working with a suitable numerical example.
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Increase in investments impacts the level of total final income in an economy due to the investment multiplier effect in place.
The multiplier concept can be referred to enhance employment, direct as well as indirect and an increase in basic investment.
Example –If Rs 100 crores is an investment in a nation and there is an increase in the total national income by Rs 300 crores then the multiple occurred is 3. If by investing the same income is Rs 400 crore the multiplier is 4.
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