Question : The investment multiplier is 4. If there is an autonomous increase in investment spending of INR 500, what will be the change in equilibrium income?
Option 1: INR 500
Option 2: INR 2,000
Option 3: INR 1,000
Option 4: INR 2,500
Correct Answer: INR 2,000
Solution : The correct answer is B) INR 2,000
To calculate the change in equilibrium income, we can use the investment multiplier. The investment multiplier represents the relationship between an autonomous change in investment spending and the resulting change in equilibrium income.
Given that the investment multiplier is 4 and there is an autonomous increase in investment spending of INR 500, the change in equilibrium income can be calculated as follows:
Change in Equilibrium Income = Autonomous Change in Investment * Investment Multiplier
= INR 500 * 4
= INR 2,000
Question : The investment multiplier is 4. If there is an autonomous increase in investment spending of INR INR 1,000,
what will be the change in equilibrium income?
Option 1: INR 1,000
Option 2: INR 4,000
Option 3: INR 5,000
Option 4: INR 9,000
Question : The investment multiplier is 3. If there is an autonomous increase in investment spending of INR 800, what will be the change in equilibrium income?
Option 1: INR 2,300
Option 2: INR 2,400
Option 3: INR 2,800
Option 4: INR 3,200
Question : The marginal propensity to consume (MPC) is 0.75. If there is an autonomous increase in investment spending of INR 1,000, what will be the change in equilibrium income?
Option 1: INR 750
Option 2: INR 1,000
Option 3: INR 1,333.33
Option 4: INR 4,000
Question : The marginal propensity to consume (MPC) is 0.8. If there is an autonomous increase in investment spending of INR 1,500, what will be the change in equilibrium income?
Option 1: INR 1,200
Option 2: INR 1,500
Option 3: INR 7,500
Option 4: INR 6,000
Question : The multiplier effect refers to the:
Option 1: Increase in consumption due to an increase in income
Option 2: Increase in investment due to an increase in consumption
Option 3: Increase in income due to an increase in investment
Option 4: Increase in income due to an initial change in spending
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