Arrange the following steps in the correct sequence to explain the working of Multiplier.

(A) Increase in income and consumption.

(B) Increase in investment.

(C) Rise in aggregate demand in each round

(D) Generation of additional income.

Choose the correct answer from the options given below:

Option 1 -> The sequence starts with (B) but places (A) before (C) and (D), which is incorrect as consumption increase follows income generation.

Option 2 -> Incorrectly starts with (A) instead of (B). The multiplier process begins with an autonomous change in investment, not consumption.

Option 3 -> Places (D) before (C), which is incorrect. The rise in aggregate demand must occur before additional income is generated.

Option 4 -> Correctly sequences the multiplier process: Investment increases first (B), raising aggregate demand (C), which generates additional income (D), leading to increased income and consumption (A) that continues the cycle.

Hence, Option 4: (B), (C), (D), (A) -> The multiplier effect follows a logical chain: (B) An initial increase in investment serves as the autonomous injection into the economy. (C) This investment raises aggregate demand in the first round. (D) The increased aggregate demand leads firms to produce more, generating additional income for factors of production. (A) Recipients of this additional income spend a portion (based on MPC), increasing consumption and income further. This creates successive rounds where each round generates smaller increases, eventually converging to the total multiplier effect (k = 1/(1-MPC)). -> correct