Question

The formula of investment multiplier in terms of MPS is (1)

Options

• `(Δ"C"Δ"D")/(Δ"C"Δ"D")`

• `1/("MPS")`

• `"C"/(Δ"I")`

• `"C"/"Y"`

Answer 1

`1/("MPS")`

Explanation:

Prof. J.M. Keynes is credited with coining the term "investment multiplier." Keynes felt that increasing original investment several times boosts end income. The relationship between an initial increase in investment and the ensuing rise in aggregate revenue is expressed by the multiplier.