UPSC Exam > UPSC Questions > Multiplier tells us what will be thea)Final c...
Start Learning for Free
Multiplier tells us what will be the
- a)Final change in the income, as a result of change in investment
- b)Final change in the consumption, as a result of change in investment
- c)Change in investment results in the change in income
- d)Final change in the income, as a result of change in consumption
Correct answer is option 'A'. Can you explain this answer?
Most Upvoted Answer
Multiplier tells us what will be thea)Final change in the income, as a...
Multiplier and Final Change in Income
What is Multiplier?
Multiplier is a macroeconomic concept that measures the change in income as a result of a change in autonomous spending. It is calculated as the ratio of the change in income to the initial change in spending.
How is Multiplier Calculated?
The formula for the multiplier is:
Multiplier = 1 / (1 - MPC)
Where, MPC is the marginal propensity to consume.
What is Marginal Propensity to Consume?
Marginal Propensity to Consume (MPC) is the proportion of an increase in income that is spent on consumption.
How does Multiplier impact Final Change in Income?
When there is a change in autonomous spending, for example, an increase in investment, the multiplier effect will come into play. The increase in investment will increase the income of those who received the investment, which in turn will be spent on goods and services, thereby increasing the income of those who produced those goods and services. This process continues, resulting in a chain reaction of spending and income generation.
The final change in income will be determined by the multiplier effect. For example, if the multiplier is 2, then an initial increase in investment of $100 will result in a final increase in income of $200.
Hence, the correct answer is option 'A', which states that the multiplier tells us the final change in income as a result of a change in investment. The multiplier effect is an important concept for policymakers as it helps them understand how changes in autonomous spending can impact the overall economy.
What is Multiplier?
Multiplier is a macroeconomic concept that measures the change in income as a result of a change in autonomous spending. It is calculated as the ratio of the change in income to the initial change in spending.
How is Multiplier Calculated?
The formula for the multiplier is:
Multiplier = 1 / (1 - MPC)
Where, MPC is the marginal propensity to consume.
What is Marginal Propensity to Consume?
Marginal Propensity to Consume (MPC) is the proportion of an increase in income that is spent on consumption.
How does Multiplier impact Final Change in Income?
When there is a change in autonomous spending, for example, an increase in investment, the multiplier effect will come into play. The increase in investment will increase the income of those who received the investment, which in turn will be spent on goods and services, thereby increasing the income of those who produced those goods and services. This process continues, resulting in a chain reaction of spending and income generation.
The final change in income will be determined by the multiplier effect. For example, if the multiplier is 2, then an initial increase in investment of $100 will result in a final increase in income of $200.
Hence, the correct answer is option 'A', which states that the multiplier tells us the final change in income as a result of a change in investment. The multiplier effect is an important concept for policymakers as it helps them understand how changes in autonomous spending can impact the overall economy.
|
Explore Courses for UPSC exam
|
|
Top Courses for UPSCView all
Question Description
Multiplier tells us what will be thea)Final change in the income, as a result of change in investmentb)Final change in the consumption, as a result of change in investmentc)Change in investment results in the change in incomed)Final change in the income, as a result of change in consumptionCorrect answer is option 'A'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Multiplier tells us what will be thea)Final change in the income, as a result of change in investmentb)Final change in the consumption, as a result of change in investmentc)Change in investment results in the change in incomed)Final change in the income, as a result of change in consumptionCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Multiplier tells us what will be thea)Final change in the income, as a result of change in investmentb)Final change in the consumption, as a result of change in investmentc)Change in investment results in the change in incomed)Final change in the income, as a result of change in consumptionCorrect answer is option 'A'. Can you explain this answer?.
Multiplier tells us what will be thea)Final change in the income, as a result of change in investmentb)Final change in the consumption, as a result of change in investmentc)Change in investment results in the change in incomed)Final change in the income, as a result of change in consumptionCorrect answer is option 'A'. Can you explain this answer? for UPSC 2025 is part of UPSC preparation. The Question and answers have been prepared according to the UPSC exam syllabus. Information about Multiplier tells us what will be thea)Final change in the income, as a result of change in investmentb)Final change in the consumption, as a result of change in investmentc)Change in investment results in the change in incomed)Final change in the income, as a result of change in consumptionCorrect answer is option 'A'. Can you explain this answer? covers all topics & solutions for UPSC 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Multiplier tells us what will be thea)Final change in the income, as a result of change in investmentb)Final change in the consumption, as a result of change in investmentc)Change in investment results in the change in incomed)Final change in the income, as a result of change in consumptionCorrect answer is option 'A'. Can you explain this answer?.
Solutions for Multiplier tells us what will be thea)Final change in the income, as a result of change in investmentb)Final change in the consumption, as a result of change in investmentc)Change in investment results in the change in incomed)Final change in the income, as a result of change in consumptionCorrect answer is option 'A'. Can you explain this answer? in English & in Hindi are available as part of our courses for UPSC.
Download more important topics, notes, lectures and mock test series for UPSC Exam by signing up for free.
Here you can find the meaning of Multiplier tells us what will be thea)Final change in the income, as a result of change in investmentb)Final change in the consumption, as a result of change in investmentc)Change in investment results in the change in incomed)Final change in the income, as a result of change in consumptionCorrect answer is option 'A'. Can you explain this answer? defined & explained in the simplest way possible. Besides giving the explanation of
Multiplier tells us what will be thea)Final change in the income, as a result of change in investmentb)Final change in the consumption, as a result of change in investmentc)Change in investment results in the change in incomed)Final change in the income, as a result of change in consumptionCorrect answer is option 'A'. Can you explain this answer?, a detailed solution for Multiplier tells us what will be thea)Final change in the income, as a result of change in investmentb)Final change in the consumption, as a result of change in investmentc)Change in investment results in the change in incomed)Final change in the income, as a result of change in consumptionCorrect answer is option 'A'. Can you explain this answer? has been provided alongside types of Multiplier tells us what will be thea)Final change in the income, as a result of change in investmentb)Final change in the consumption, as a result of change in investmentc)Change in investment results in the change in incomed)Final change in the income, as a result of change in consumptionCorrect answer is option 'A'. Can you explain this answer? theory, EduRev gives you an
ample number of questions to practice Multiplier tells us what will be thea)Final change in the income, as a result of change in investmentb)Final change in the consumption, as a result of change in investmentc)Change in investment results in the change in incomed)Final change in the income, as a result of change in consumptionCorrect answer is option 'A'. Can you explain this answer? tests, examples and also practice UPSC tests.
|
|
Explore Courses for UPSC exam
|
|
Signup for Free!
Signup to see your scores go up within 7 days! Learn & Practice with 1000+ FREE Notes, Videos & Tests.
|
© EduRev
|
Education Revolution
|
|
Signup on EduRev and stay on top of your study goals
10M+ students crushing their study goals daily