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प्रश्न
Discuss the mechanism of investment multiplier with the help of a numerical.
उत्तर
Investment multiplier is the number of times income rises due to a rise in the investment expenditure in the economy. It is represented as (K).
The working of multiplier is based on the assumption that one man's expenditure is another man's income.
Suppose, Government of the country, spends ₹ 100 crores on the construction of road i.e. Δ I = ₹ 100. The first impact is that it increases the income of the workers engaged in the work by ₹ 100 crores.
Assuming MPC = 0.75, the workers will spend 75 crore i.e. 0.75 × 100 on consumer goods. The producers of these goods will have an additional income of 75 crores. This additional income will be spend on goods i.e. 0.75 × 75 = ₹ 56.25 crore:
This process will continue, till the change in income becomes equal to multiple times the change in investment.
Hence,
| Rounds | AI | AY | AC |
| I | 100 | 100 | 75 |
| II | 75 | 56.25 | |
| III | 56.25 | 42.18 | |
| : | : | ||
| Total | 400 | 300 |
K = `1/(1 - "MPC")`
`= 1/(1 - 0.75)`
= 4
K = `(Delta "Y")/(Delta "I")`
`4 = (Delta "Y")/100`
Δ Y = ₹ 400
Additional income = ₹ 400
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संबंधित प्रश्न
Define multiplier
Calculate the marginal propensity to consume if the value of multiplier.
The value of the multiplier is: (choose the correct alternative)
a. `1/"MPC"`
b. `1/"MPS"`
c. `1/(1-"MPS")`
d. `1/(MPC- 1)`
If MPC = 1, the value of the multiplier is ______
If MPC = 0, the value of the multiplier is: (Choose the correct alternative)
a. 0
b. 1
c. Between 0 and 1
d. Infinity
How is investment multiplier related to marginal propensity to consume?
If in an economy :
Change in initial Investments (∆I) = ₹ 500 crores
Marginal Propensity to Save (MPS) = 0.2
Keynesian multiplier establishes a relationship between ______
The value of Keynesian Investment Multiplier depends on ______
The formula of investment multiplier in terms of MPS is (1)
For a hypothetical economy, assuming there is an increase in the Marginal Propensity to Consume (MPC) from 80% to 90% and change in investment to be ₹ 1000 crore.
Using the concept of investment multiplier, calculate the increase in income due to change in Marginal Propensity to Consume.
For a hypothetical economy, assuming there is an increase in the Marginal Propensity to Consume from 80% to 90% and change in investment to be ₹ 2000 crore.
Using the concept of investment multiplier, calculate the increase in income due to change in Marginal Propensity to Consume.
If a linear consumption curve takes a parallel shift downwards, the value of investment multiplier will ______.
Mention any one difference between Induced investment and Autonomous investment.
Illustrate that the investment multiplier is inversely proportional to MPS.
