Question

The following table Illustrates the multiplier process after making an additional investment of Rs. 1,000 crores. Calculate the missing values.

	Increase in Income (Rs. Crores)	Chnaage in Consumption (Rs. Crores)	Change in Saving (Rs. Crores)
Fist Round	?	?	200
Second Round	?	640	?
Third Round	?	?	?
All other Rounds	?	?	?
Total	?	?	?

Answer 1

Investment multiplier refers to the number of time 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.

Particulars	Increase in Income (Rs. Crores)	Change in Consumption (Rs. Crores)	Change in Saving (Rs. Crores)
Fist Round	1000	800	200
Second Round	800	640	160
Third Round	640	512	128
All other Rounds	2,560	2,048	512
Total	5,000	4,000	1,000