Identify the correct chain of action from the following :

(A) Investment multiplier rises

(B) Economy grows

(C) MPC rises

(D) Income rises

Choose the correct answer from the options given below :

(C), (A), (D), (B)

The correct answer is option (2) : (C), (A), (D), (B)

• MPC rises: When the Marginal Propensity to Consume (MPC) increases, it means that consumers are spending a larger fraction of any additional income they receive.

• Investment multiplier rises: The investment multiplier (k) is given by the formula k=1/ (1−MPC)​. If MPC rises, the denominator (1−MPC) becomes smaller, causing the multiplier to rise.

• Income rises: A higher investment multiplier means that any initial increase in investment leads to a larger increase in overall income.

• Economy grows: As income rises, it stimulates further economic activities and investments, leading to overall economic growth.