What will be the change in income when multiplier is 3 and increase in investment is Rs 20 crore?
Answer & explanation
Correct answer: option 4
The correct answer is Option 4: 60 crore
Investment multiplier refers to the increase in the aggregate income of the economy as a result of an increase in the investments done by the government. The ratio of ΔY to ΔI is called the investment multiplier.
K = \(\frac{ΔY}{ΔI}\)
3 = \(\frac{ΔY}{\text{20 crore}}\)
ΔY = 20 crore * 3
ΔY = 60 crore