# Scanner Chapter 7-11 : Investment Multiplier - Macroeconomics Commerce Notes | EduRev

## Commerce : Scanner Chapter 7-11 : Investment Multiplier - Macroeconomics Commerce Notes | EduRev

The document Scanner Chapter 7-11 : Investment Multiplier - Macroeconomics Commerce Notes | EduRev is a part of the Commerce Course Economics Class 12.
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SAMPLE PAPER + C.B.S.E 2010

(Q1) Giving reasons, state whether the following statements are true or false :

(4M)

(i) When marginal propensity to consume is zero, the value of investment multiplier will
also be zero
(ii) If the ratio of marginal propensity to consume and marginal propensity to save is 4 :1,
the value of investment multiplier will be 4..

(Q2) In an economy the equilibrium level of income is Rs. 12,000 crore. The ratio of marginal propensity to consume and marginal propensity to save is 3: 1. Calculate the additional investment needed to reach a new equilibrium level of income of Rs. 20,000 crore.

(4M)

(Q3) In an economy income increases by 10,000 as a result of a rise in investment expenditure by 1,000. Calculate:
(a) Investment Multiplier

(b) Marginal Propensity to Consume.

(3 M)

(Q4) The saving function of an economy is S = - 200 + .25Y. The economy is in equilibrium when
income is equal to 2000. Calculate
(a) Investment expenditure at equilibrium level of output
(b) Autonomous consumption
(c) Investment multiplier

(Q5) Give the meaning of ex-ante saving and ex-ante investment ?

(Q6) Giving reasons, state whether the following statements are true or false :

(4M)

(a) When MPC is greater than MPS ,the value of multiplier will be greater than 5
(b) when investment multiplier is 1 , the value of MPC is 0
(c) the value of investment multiplier varies between zero and infinity
(d) there is inverse relationship between MPS and investment multiplier

Ans :: False not allways , only when if MPC is greater than 0.8 , True , False , True

C.B.S.E PAPER 2011 & 2012

(Q1) In an economy the marginal propensity to consume is 0.75. Investment expenditure in the economy increases by Rs.75 crore. Calculate the total increase in national income.

(3 marks)

(Q2) In an economy the marginal propensity to save is 0.4. National income in the economy increases by Rs.200 crore as a result of change in investment. Calculate the change in investment.

(3 marks)

(Q3) As a result of increase in investment by Rs.60 crore, national income rises by Rs.240 crore. Calculate marginal propensity to consume.

(3 marks)

SAMPLE PAPER

(Q1) What is the value of multiplier ? When Marginal Propensity to Save is zero ?

(1 mark)

Ans. The value of multiplier is Infinity.

(Q2) Explain the working of investment multiplier with the help of a numerical example.

(Q3) The value of MPC is double the value of MPS . Find the value of multiplier ?

ans :: 3

CBSE 2015 & 2016

(Q1) If MPC = 1, the value of multiplier is :

(1 M)

(a) 0        (b) 1          (c) Between 0 and 1   (d) Infinity

Ans :: (d)

(Q2) If MPC = 0, the value of multiplier is :

(1 M)

(a) 0     (b) 1     (c) Between 0 and 1     (d) Infinity

Ans :: (b)

(Q3) The value of multiplier is
(a) 1 / MPC (b) 1/MPS (c) 1 / 1-MPS (d) 1 / MPC -1

(Q4) Explain the process of working of the ‘investment multiplier’ with the help of a numerical example.

(Q5) In an economy an increase in investment by Rs.100 crore led to ‘increase’ in national income by Rs.1000 crore. Find marginal propensity to consume.

Ans :: 0.9

(Q6) In an economy investment is increased by 300 crore. If MPC is 2 /3 , calculate increase in income .

Ans :: 900

(Q7) Suppose MPC is 0.8 . How much increase in investment is required to increase national income by 2000 crore ? Calculate

Ans :: 400 crore

(Q8) In an economy , investment increases from 300 to 500 . As a result of this , equilibrium levelof income increases by 2,000 . Find MPC

Ans :: 0.9

(Q9) In an economy , 20% of the increased income is saved . How much will be the increase in income if investment increases by 10,000 ? Calculate ?

Ans 50000

(Q10) What will be the value of multiplier if entire additional income in converted into additional consumption ?
( Ans. Infinity )

EXTRA QUESTION’S

(Q1) Give a formula to show the relationship between multiplier and MPC ?

(Q2) Explain the meaning of investment multiplier. What can be its minimum value and why ?

(Q3) What is meant by investment multiplier ? Explain the relationship between MPC and investment multiplier

(Q4) Explain the working of investment multiplier with the help of numerical example ?

(Q5) In poor countries like India, people spend a high percentage of their income so that APC and MPC are high. Yet value of the multiplier is low . Why ?

(Q6) Would you suggest higher value of consumption or saving for higher value of multiplier ?

(Q7) What is MPC ? How does it affect the level of income in the economy ?

(Q8) Explain with the help of numerical example how an increase in investment in an economy affects its level of income

(C.B.S.E 2005)

(Q9) Explain the relationship between MPS and Multiplier ?

(Q10) Show working of a multiplier with investment expenditure increases by 1000 cr and MPC = .8

(Q11) In an economy an increase in investment leads to increase in national income which is three times more than the increase in investment. Calculate marginal propensity to consume.

(3M) (c)

(Q12) Given marginal propensity to save equal to 0.25, what will be the increase in national income if investment increases by Rs. 125 crores. Calculate.

(3M) (c)

(Q13) If MPC and MPS are equal, what is the value of the multiplier?

(1) (s)

(Q14) An increase of Rs. 250 crores in investment in an economy resulted in total increase in income of Rs. 1000 crores, Calculate the following :
(a) Marginal propensity to consume (b) Change in Savings
(c) Change in consumption expenditure (d) Value of multiplier

(4) (s)

(Q15) If the value of multiplier is 4 . What will be MPC and MPS ? (s)

(Q16) An increase in investment leads to total rise in national income by Rs 500 crores. If MPC is 0.9, what is the increase in investment ? Calculate

(Q17) If MPC is 0.9 and increase in investment is 100 crore , find out increase in national income.

(Q18) There is increase in investment of 100 crore in an economy . MPC = 1 . What can you say about increase in income ? Calculate (Q20) “Government plans massive public investment to boost economy” . Explain how ?

(Q21) “ Banks need to channelise household savings into financial system” What is the economic
value of this statement

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## Economics Class 12

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