Question:
Suppose, the saving curve of an economy makes an intercept at a negative value of ₹ 50 crores. In the economy, 20\% of an increase in income is saved.
In the light of the above context, identify the value of investment multiplier (K). (Choose the correct option)
Suppose, the saving curve of an economy makes an intercept at a negative value of ₹ 50 crores. In the economy, 20\% of an increase in income is saved.
In the light of the above context, identify the value of investment multiplier (K). (Choose the correct option)
In the light of the above context, identify the value of investment multiplier (K). (Choose the correct option)
Show Hint
Multiplier (K) is the reciprocal of MPS. Higher MPS means a lower multiplier.
Updated On: July 22, 2025
- 2
- 4
- 5
- $\infty$ (infinite)
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The Correct Option is C
Solution and Explanation
The Marginal Propensity to Save (MPS) is 0.20.
\[
K = \frac{1}{MPS} = \frac{1}{0.20} = 5
\]
Thus, the investment multiplier is 5.
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