Macro

Income & Employment

Medium

If Multiplier is 2.5,how much investment will be required to generate additional income of 1000 crores?

1000 crores

400 crores

100 crores

250 crores

✅ Correct Option: 2

Option 1 -> If investment is 1000 crores, income generated = 2.5 × 1000 = 2500 crores (not 1000).

Option 2 -> If investment is 400 crores, income generated = 2.5 × 400 = 1000 crores (matches requirement).

Option 3 -> If investment is 100 crores, income generated = 2.5 × 100 = 250 crores (not 1000).

Option 4 -> If investment is 250 crores, income generated = 2.5 × 250 = 625 crores (not 1000).

Hence, Option 2: 400 crores -> Using the multiplier formula: Change in Income = Multiplier × Change in Investment. Rearranging: Change in Investment = Change in Income / Multiplier = 1000 / 2.5 = 400 crores. The multiplier effect shows that an initial investment of 400 crores will generate a total income of 1000 crores through successive rounds of spending in the economy. -> correct

2023: 28 May Shift 2

The aggregate demand line shifts parallel upwards. The reason behind this is :

2024: 16 May

__________ depicts what has actually happened.

2026: 11 May Shift 1

Find the correct options from the following on which investment decisions of a firm depends.

A. Cost of capital

B. Availability of stocks of inventories

C. Expected returns from the investment

D. Availability of capital

Choose the correct answer from the options given below:

2025: 15 May Shift 1

Suppose at the initial equilibrium of $Y^*$ , there is an exogenous or autonomous shift in peoples' expenditure pattern – they suddenly become more thrifty.

What will be the sequential effect of the above on the economy?

(A) The sudden decline in MPC will imply a decrease in aggregate consumption spending and hence in aggregate demand.

(B) There emerges an excess supply in the economy, but that would mean a reduction in factor payments in the next round and hence a reduction in income.

(D) MPS of the economy increases, and hence MPC falls.

Choose the correct answer from the options given below:

2025: 27 May Shift 2

Match List-I with List-II

List-I	List-II
(A) Final goods market	(I) A + cY
(B) Consumers demand	(II) ΔY/ΔA
(C) Investment multiplier	(III) Ĉ + cY
(D) Linear equation	(IV) a + bX

Choose the correct answer from the options given below:

2026: 13 May Shift 2

The algebraic expression of aggregate demand for final goods can be written as:

If Multiplier is 2.5,how much investment will be required to generate additional income of 1000 crores?

Solution

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