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Home Questions 5DTYJHPAUW
Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Determination of Income and Employment

Question:

The investment multiplier is equal to which of the following?

Options:

Ratio of investment to income.

Ratio of change in investment to change in income

Reciprocal of marginal propensity to save.

Ratio of change in income to change in consumption.

Correct Answer:

Reciprocal of marginal propensity to save.

Explanation:

The correct answer is Option (3) → Reciprocal of marginal propensity to save.

The investment multiplier (K) measures how much total income changes as a result of a change in investment. It is given by the formula: K = 1 / (1 – MPC) = 1 / MPS

Hence, the investment multiplier is the reciprocal of the marginal propensity to save (MPS).

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