How is the investment multiplier (K) mathematically defined?
Understand the Problem
The question is asking for the mathematical definition of the investment multiplier (K), providing multiple-choice answers that relate to its formula. We need to identify which option correctly represents this definition.
Answer
K = ΔY / ΔI
The investment multiplier (K) is mathematically defined as the ratio of the change in national income (ΔY) to the change in investment (ΔI), expressed as K = ΔY / ΔI.
Answer for screen readers
The investment multiplier (K) is mathematically defined as the ratio of the change in national income (ΔY) to the change in investment (ΔI), expressed as K = ΔY / ΔI.
More Information
The investment multiplier measures how much the national income changes in response to a change in investment, indicating the sensitivity of the economy to changes in investment levels.
Tips
Confusing the concepts of investment multiplier with other economic multipliers like fiscal or money multipliers can lead to errors.
Sources
- Unit-II-Lesson-6 - Vidyaprasar - vidyaprasar.dei.ac.in
- Investment Multiplier and its Mechanism - BYJU'S - byjus.com
AI-generated content may contain errors. Please verify critical information
