Answer:
The no of times by which income increases or a result of increase in investment is called investment multiplier. Investment multiplier shows a relationship between initial increment in investment and the resulting increment in national income. K=\[\frac{\Delta Y}{\Delta I}\] where K=multiplier \[\Delta Y\]=change in income \[\Delta I\]=change in investment Relation of multiplier with MPC: K=\[\frac{\Delta Y}{\Delta I}\] K=\[\frac{\Delta Y}{\Delta I}\] (Dividing this equation, by AY we get) \[K\,\,=\,\,\frac{\Delta Y}{\Delta Y-\Delta C}\] =\[\frac{\frac{\Delta Y}{\Delta Y}}{\frac{\Delta Y}{\Delta Y}-\frac{\Delta C}{\Delta Y}}=\frac{1}{1-MPC}\] There is a direct relation between K and MFC. If MFC is high, K will also be high but if MFC is low K will also be small.
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