CBSE 2022 Class 12 Economics Delhi Set 1 (Term 2)

Question : 15

Total: 21

Tnvestment multiplier and Marginal Propensity to Consume are directly related to each other'. Explain with the help of numerical example.

Solution:

Investment multiplier and MPC are directly related to each other. It can be as follows:
K=‌

1−MPC

If MPC‌=0.4
thenK‌=‌

1−0.4

=‌

0.6

If MPC‌=0.6
thenK‌=‌

1−0.6

=‌

0.4

∴ Both are directly related with the increase in MPC, investment multiplier will increases.

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