What do you mean by investment multiplier ? Explain with the help of suitable example.
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An investment multiplier basically refers to the concept that any increase or change in public or private investment expenditure has a very large positive effect on aggregate income and the general economy.
The multiplier attempts to mathematically measure the additional effects of a policy beyond those directly measurable. Multiplier’s value is function of various factors like the marginal propensity to consume (MPC) and the marginal propensity to save (MPS).
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