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Question

The multiplier can be expressed algebraically as _________________.

A
K=ΔIΔY
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B
K=ΔAEΔAD
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C
K=ΔYΔI
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D
K=ΔYΔAD
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Solution

The correct option is C K=ΔYΔI

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 and it is denoted as 'k'. Algebraically,

k = ΔY/ ΔI where Y is the income and I is the investment expenditure in the economy.


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