Q.The Multiplier is calculated as ________.

Step 1 — Find the multiplier

Step 2 — Relate the multiplier to MPC

Step 3 — Solve for MPC

Step 4 — Eliminate the others …

Step 1 — State the multiplier formula

with the identity MPC + MPS = 1.

Step 2 — See how k responds to MPC and MPS

• A higher MPC makes the denominator (1 − MPC) smaller, so k is larger.
• Equivalently, a higher MPS makes k = 1/MPS smaller.

Step 3 — Test each statement

• (A) Higher MPC → higher multiplier — TRUE, matches the formula.
• (B) Higher MPS → higher multiplier — false (higher MPS lowers k).
• (C) Lower MPC → higher multiplier — false (lower MPC lowers k).
• (D) Lower MPS → lower multiplier — false (lower MPS raises k).

Step 4 — Numerical check …

Step 1 — The multiplier formula

The investment multiplier links a change in investment to the eventual change in income:

Step 2 — Compute the multiplier

Step 3 — Apply it to the investment change

Why the other options are wrong

• (A) ₹300 crores ignores the multiplier (assumes k = 1).
• (B) ₹100 crores has no valid derivation. …

Step 1 — Definition

When investment rises, the extra spending becomes someone's income, part of which is re-spent, and so on. The multiplier captures the total, magnified effect on national income:

Step 2 — Read the ratio correctly

Income ($\Delta Y$) is on top, investment ($\Delta I$) at the bottom. So the multiplier is 'change in national income due to change in investment'.

Step 3 — Why the other options are wrong

• (A) links investment to saving — that is not the multiplier.
• (B) 'change in demand due to change in investment' is loosely worded and not the standard definition. …

Step 1 — The multiplier formula

The multiplier grows as MPC rises toward 1 (equivalently, as MPS falls toward 0).

Step 2 — When does it become infinite?

A fraction blows up to infinity only when its denominator approaches zero:

With MPC = 1 every additional rupee of income is re-spent, so successive rounds of spending never leak away and the multiplier is theoretically infinite.

Why the other options are wrong

• (B) MPC = −1 and (D) MPS = −1 are economically impossible; MPC and MPS lie between 0 and 1. …

Step 1 — Find the multiplier

Step 2 — Link the multiplier to MPC

Step 3 — Solve for MPC

Why the other options are wrong

MPC values of 0.85, 0.75 or 0.95 correspond to multipliers of about 6.7, 4 and 20 respectively — none of which equals the actual multiplier of 10 implied by the data. …