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JAMB Economics 1989 Question 47

Question 47

National Income

The multiplier is defined as

  1. A.the ratio of the change in income to the change in investment
  2. B.the change in investment divided by the change in income
  3. C.1/(MPC)
  4. D.1/(1 − MPS)
Show the answer and explanation

Answer: A (the ratio of the change in income to the change in investment)

Explanation

The investment multiplier k = change in income ÷ change in investment (equal to 1/MPS, not 1/MPC).