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How is Investment Multiplier Related to Marginal Propensity to Consume? - Economics

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Question

How is investment multiplier related to marginal propensity to consume?

Solution

There exists a direct and positive relationship between Investment Multiplier and MPC. Algebraically, the relationship is expressed as:

\[k = \frac{1}{1 - MPC} = \frac{1}{1 - c}\]
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Investment Multiplier and Its Mechanism
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2017-2018 (March) Delhi Set 2

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