EduFarming
Your list · 0हिं

Type at least two letters. Press Esc to close.

↑↓ navigate↵ openTAB cycle filter

Income Determination & the Multiplier · Question 45 of 58

The graph shows AD rising from AD₁ to AD₂ after investment rises by ₹20 crore.

Question 45

HardOriginal question

The graph shows AD rising from AD₁ to AD₂ after investment rises by ₹20 crore. What is the multiplier, and what is the MPC?

Two parallel aggregate demand lines and a dashed 45° line. AD₁ starts at ₹100 crore and meets the 45° line at E₁ (income ₹400 crore). After investment rises by ₹20 crore, AD₂ starts at ₹120 crore and meets the 45° line at E₂ (income ₹480 crore).
Options for question 45

Show the answer and explanation
CorrectNot quiteAnswer A

Correct answer: A

Explanation

  1. ΔY = 480 − 400 = 80 and ΔI = 20, so k = 80 ÷ 20 = 4.

  2. 1 ÷ (1 − MPC) = 4 gives MPC = 0.75.

Concept
Multiplier from the graph
Typical time
100 s
Your time
—
The rule this testsThe investment multiplier
Practise this chapter →

Ten questions from Income Determination & the Multiplier, at your own pace.

Practise this chapter →

Ten questions from Income Determination & the Multiplier, at your own pace.

Practise this chapterAll 58 questions in Income Determination & the MultiplierRevise the notes for Income Determination & the Multiplier