# Explain the working of investment multiplier with the help of numerical example. (for 3 marks)

Investment multiplier is defined as multiple increase in income due to the increase in investment.
For ex. suppose government. invested 100 (crore). for some construction work. this 100 would be the income for the worker(taking all the workers as one for better understanding.) let the MPC of worker be 0.5, hence he will spend  . and save 50. this 50 will be income for those on whom worker spent it. Then again 25 will be spent and this chain of secondary consumption will continue till there is nothing left to save.

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*in the third line it would be he will spend 50
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In the above example if you want to calculate total increase in income this is how you can do it:
increase in income =100+50+25+...........
= 100+100/2+100/4+..........
= 100(1/1-1/2)
= 100(2)
= 200
Hence, with an increase of 100cr. in investment income increased to 200cr.
The above calculations are done using Geometric Progrssions.
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Hritik
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Difen Tr ,are and Mr .discuss the relationship between are and mr
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Nahiii dena
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Investment multiplier is the ratio of a change in income to given change in investment
K=?y. 60
-. = -. = 4
?I 15
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