If there is an increase in investment by Rs100 in an economy, MPC = 0.9, choose the correct sequence with reference to the working of the investment multiplier.

(A) Producers increase their planned output further by (0.9)10, the income of the economy goes up by (0.9)10 and consumption demand increases further by (0.9)² 10.

(B) This process goes on, round after round.

(C) Income increases by 100, Consumption expenditure increases by 90 and therefore, aggregate demand goes up by 90.

(D) The total increment in the income will be 1000.

Choose the correct answer from the options given below:

Option 1 -> This sequence starts with (A) which describes a subsequent round, not the initial impact.

Option 2 -> This sequence starts with (B) which describes the continuation process, but doesn't establish the initial round first.

Option 3 -> This correctly sequences the multiplier process: (C) describes the first round where initial investment of Rs 100 increases income by Rs 100 and consumption by Rs 90, then (A) shows the second round where producers increase output by Rs 90, income rises by Rs 90, and consumption increases by Rs 81 (0.9² × 100), then (B) indicates this process continues through multiple rounds, and finally (D) gives the total impact of Rs 1000 (using multiplier = 1/(1-MPC) = 1/0.1 = 10, so 100 × 10 = 1000).

Option 4 -> This sequence starts with the final result (D) before explaining the process, which is illogical.

Hence, Option 3: (C), (A), (B), (D) -> The investment multiplier works in a logical sequence: First, the initial investment of Rs 100 increases income by Rs 100 and consumption by Rs 90 (C). In the second round, this Rs 90 demand leads to output increase of Rs 90, further income of Rs 90, and consumption of Rs 81 (A). This chain reaction continues through multiple rounds (B), and ultimately the total income increase equals Rs 1000, calculated as Initial Investment × Multiplier = 100 × [1/(1-0.9)] = 100 × 10 = 1000 (D). -> correct