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Question
Define investment multiplier.
Solution
Investment multiplier or simply 'multiplier' implies that any change in the investment leads to a corresponding change in the income and output by multiple times. That is, in other words, the change in the income and output is more than (or multiple times of) the change in investment. For example, if investment increases by 10%, then the corresponding increase in the income and output will be more than (let say 30% or 40%) the increase in the investment. Algebraically, investment multiplier is expressed as a ratio of the change in output to the change in investment.
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