Investment multiplier shows a relationship between initial increment in investment and the resulting increment in national income. … For example, if an increase in investment of Rs 50 crore causes an increase in national income of Rs 300 crore, then value of multiplier would be 6 (= 300 ÷ 50).

## What is meant by investment multiplier explain with the help of suitable example?

The investment multiplier refers to **the stimulative effects of public or private investments**. It is rooted in the economic theories of John Maynard Keynes. The extent of the investment multiplier depends on two factors: the marginal propensity to consume (MPC) and the marginal propensity to save (MPS).

## What is meant by investment multiplier explain the working of investment multiplier with the help of a numerical example & relationship between marginal propensity to consume and investment multiplier?

Investment multiplier implies **that any change in the investment leads to a corresponding change in the income and output by multiple times**. … That is, higher the value of MPC, higher will be the value of investment multiplier and vive-versa. Algebraically, the relationship is expressed as follows.

## What is investment multiplier explain the working of multiplier with the help of a numerical example?

** Since MPC = 0.8, the income earners speed Rs **800** on consumption. This raises the income of the suppliers of consumption goods by Rs 800. This is second round increase. ** In the similar way the third round increase is Rs 640=800×8.

## What is multiplier explain the working of multiplier?

Explaining Multipliers

A multiplier is **simply a factor that amplifies or increase the base value of something else**. A multiplier of 2x, for instance, would double the base figure. A multiplier of 0.5x, on the other hand, would actually reduce the base figure by half.

## What is the importance of multiplier?

Multiplier **helps in estimating the increase in income as a result of increase in investment**. So, multiplier will be of great importance in formulating progressive policies to bring the effects in the economy to right speed.

## What is the concept of multiplier?

In macroeconomics, a multiplier is **a factor of proportionality that measures how much an endogenous variable changes in response to a change in some exogenous variable**. For example, suppose variable x changes by 1 unit, which causes another variable y to change by M units. Then the multiplier is M.

## What is the formula of investment multiplier?

1, that is, investment multiplier ∆Y/∆I is and its value is equal to 1/1-b where b stands for marginal propensity to consume (MPC). Thus, multiplier =∆Y/∆I =1/ 1-b equals marginal propensity to save (MPS) the value of investment multiplier is equal to **1/1-b = 1/s** where s stands for marginal propensity to save.

## What are the types of multiplier?

**3 Different Types of Multipliers**

- Modified booth/booth multiplier [3, 9]
- Array multiplier [6]
- Wallace tree multiplier [2, 5]
- Combinational multiplier [2]
- Sequential multiplier [1, 21]
- Logarithm multiplier [14, 15, 17, 18].

## What is the value of multiplier when MPC is zero?

When marginal propensity to consume is zero, the value of investment multiplier will also be **zero**.