Question

An increase of Rs. 100 crores in investment leads to a rise of Rs. 500 crores in the national income. Calculate the value of multiplier.

Answer 1

Investment multiplier refers to the number of times by which the increase in output or income exceeds the increase in investment. It is measured as the ratio between change in income and change in investment and it is denoted as 'k'.

Multiplier ($k$) $=\frac{Changeinincome}{Changeininvestment}$

$=\frac{500}{100}$

$=5$