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Question : The investment multiplier is 2. If there is an autonomous increase in investment spending of INR 600, what will be the change in equilibrium income?

Option 1: INR 600

Option 2: INR 1,200

Option 3: INR 1,800

Option 4: INR 2,400


Team Careers360 1st Jan, 2024
Answer (1)
Team Careers360 12th Jan, 2024

Correct Answer: INR 1,200


Solution : The correct answer is  B) INR 1,200

To calculate the change in equilibrium income resulting from an autonomous increase in investment spending, we can use the multiplier effect. The investment multiplier is given as 2.

Given: Investment multiplier (K) = 2

Autonomous increase in investment spending = INR 600

Change in equilibrium income = K * Autonomous increase in investment spending

Change in equilibrium income = 2 * 600

Change in equilibrium income = 1200

Therefore, the change in equilibrium income is INR 1,200.

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