Q.(a) Illustrate the working of Multiplier.

With MPC = 0.5, the multiplier equals 1/(1 − MPC) = 1/0.5 = 2 — option (b).

The investment multiplier (k) shows by how many times national income rises for a given rise in investment. Its formula is k = 1/(1 − MPC), where MPC is the marginal propensity to consume. This is a core numerical in the Tamil Nadu HSC Class-12 Economics syllabus (Consumption and Investment Functions).

Substituting MPC = 0.5: …

The multiplier equals both 1/(1 − MPC) and 1/MPS — option (d).

In the Tamil Nadu HSC Class-12 Economics syllabus (Consumption and Investment Functions), the investment multiplier is defined as k = 1/(1 − MPC).

Because the marginal propensity to consume and the marginal propensity to save always add to 1:

• MPC + MPS = 1, so MPS = 1 − MPC. …

The investment multiplier quantifies how much national income changes for a given change in investment, and its value is determined by the Marginal Propensity to Consume (MPC). In this case, an MPC of $0.75$ leads to an investment multiplier of $4$.

• Part (a): $K=5 \Rightarrow \text{MPS}=0.2$; $S=-100+0.2Y$; at $Y=1400$, $S=\text{₹}180$ crore — Option (B).
• Part (b): $K = 1/(1-\text{MPC})$ with $0\le \text{MPC}<1$, so $K$ lies between 1 and infinity — Option (B).

Part (a): $K = 1/\text{MPS} = 1/0.5 = 2$ → option (b).

Part (b): $K = \Delta Y/\Delta I = 3{,}000/1{,}200 = 2.5$ → option (b).

The multiplier can be written as 1/(1 - MPC) or as 1/MPS, so option (d) is correct.

In the multiplier topic of the Tamil Nadu HSC Commerce syllabus, the investment multiplier (K) measures how a change in investment produces a magnified change in national income.

It is derived as:

• K = 1 / (1 - MPC), where MPC is the marginal propensity to consume.
• Since MPC + MPS = 1, we have 1 - MPC = MPS.
• Therefore K = 1 / MPS, where MPS is the marginal propensity to save. …

The multiplier equals 1/(1 – MPC), which is the same as 1/MPS.

The investment multiplier (k) measures how much national income rises for a given rise in investment. It is defined as:

k = 1 / (1 – MPC)

Since MPC + MPS = 1, we have 1 – MPC = MPS. Substituting gives:

k = 1 / MPS

…

J.R. Hicks first used the term 'Super Multiplier'.

The multiplier (Keynes/Kahn) shows how a rise in investment raises income, while the acceleration principle shows how a rise in income (consumption) induces further investment. When these two interact and reinforce each other, the combined effect is larger than either …