Economics · Keynesian Multiplier
Given below are two statements, one labeled as Assertion (A) and the other as Reason (R): Assertion (A): In a simple Keynesian two-sector model, the value of the investment multiplier k = 11 - MPC. If MPC = 0.75, then k = 4, and a ₹100 crore increase in autonomous investment raises national income by ₹400 crore. Reason (R): The multiplier works through successive rounds of consumption spending where each round adds MPC times the previous round's income, forming a geometric series summing to 11 - MPC. Choose the correct option:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
Share:
- 1(A) is false, but (R) is true
- 2(A) is true, but (R) is false
- 3Both (A) and (R) are true, but (R) is NOT the correct explanation of (A)
- 4Both (A) and (R) are true, and (R) is the correct explanation of (A)✓
Correct answer
Both (A) and (R) are true, and (R) is the correct explanation of (A)
Download Single Question PDF
Save this question and verified answer as a clean study sheet with live clickable link.
👥
Share with Friends & Study Groups
Challenge your peer aspirants on WhatsApp or Telegram to solve this question!
Online Test Series
Start Free Mock Test →Preparing for Economics?
Practice full-length mock tests with real exam timers, instant score analysis, and all-India ranking.
Chapter Practice
Practice Keynesian Multiplier MCQs →Want more practice questions on Keynesian Multiplier?
Solve complete topic-wise tests with detailed solutions on GkGet.
Related Practice Questions
Recommended practice questions in Economics · Keynesian Multiplier