Option 4: 4 -> The investment multiplier is calculated using the formula: k = 1/(1-MPC). From the given aggregate demand function AD = 80 + 0.75Y, we can identify that the marginal propensity to consume (MPC) = 0.75. Therefore, the multiplier k = 1/(1-0.75) = 1/0.25 = 4. This means that a one-unit increase in investment will lead to a 4-unit increase in national income through the multiplier effect. -> correct
In an economy , the aggregate demand function is given by AD= 80 + 0.75 Y. What will be the value of investment multiplier?
CUET UG 2025 — Economics Macro
In an economy , the aggregate demand function is given by AD= 80 + 0.75 Y. What will be the value of investment multiplier?
Held on 30 May 2025 · Verified 13 Jul 2026.
Options
- A
0.25
- B
2
- C
0
- D
4
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