Practicing Success

Target Exam

CUET

Subject

Economics

Chapter

Macro Economics: Determination of Income and Employment

Question:

The ratio of the total increment in equilibrium value of final goods to the initial increment in autonomous expenditure is called ______.

Options:

Paradox of Thrift

Multiplier Mechanism

Investment Multiplier

Money Multiplier

Correct Answer:

Investment Multiplier

Explanation:

The correct answer is Option (3) → Investment Multiplier

The ratio of the total increment in equilibrium value of final goods output to the initial increment in autonomous expenditure is called the investment multiplier of the economy.

The investment multiplier = 1/ (1-c) = 1/MPS