Investment Multiplier MCQs with Answers
Investment Multiplier – MCQs with Answers
Class: CBSE Class 12
Subject: Economics
Section: Determination of Income and Employment — Introductory Macroeconomics
Topic: Investment Multiplier
Exam Focus: CBSE Board Examinations (NCERT Based)
1. Investment Multiplier measures the relationship between:
Answer: B. Change in Investment and Change in Income
Multiplier shows how much national income changes due to a change in investment.
Multiplier shows how much national income changes due to a change in investment.
2. Formula of Investment Multiplier (K) is:
Answer: B. 1 / MPS
Since MPS is leakage from income, multiplier is the reciprocal of MPS.
Since MPS is leakage from income, multiplier is the reciprocal of MPS.
3. If MPC = 0.8, multiplier will be:
Answer: C. 5
K = 1 / (1 − MPC) = 1 / 0.2 = 5.
K = 1 / (1 − MPC) = 1 / 0.2 = 5.
4. Higher MPC leads to:
Answer: B. Higher multiplier
More consumption creates repeated income generation.
More consumption creates repeated income generation.
5. Multiplier works through:
Answer: B. Income rounds
Initial investment creates successive rounds of spending.
Initial investment creates successive rounds of spending.
6. If MPS = 0.25, multiplier equals:
Answer: C. 4
K = 1 / 0.25 = 4.
K = 1 / 0.25 = 4.
7. Multiplier effect stops when:
Answer: C. Leakages equal injections
Equilibrium is restored when savings match investment.
Equilibrium is restored when savings match investment.
8. Multiplier is directly related to:
Answer: A. MPC
Higher MPC increases spending cycles.
Higher MPC increases spending cycles.
9. Multiplier is inversely related to:
Answer: C. MPS
Higher saving reduces spending rounds.
Higher saving reduces spending rounds.
10. If multiplier is 4 and investment increases by ₹100 crore, income rises by:
Answer: D. ₹400 crore
Income change = Multiplier × Investment change.
Income change = Multiplier × Investment change.
11. Multiplier concept was developed by:
Answer: B. J.M. Keynes
Keynes introduced multiplier in employment theory.
Keynes introduced multiplier in employment theory.
12. Multiplier is zero when MPC is:
Answer: B. 0
No consumption means no income rounds.
No consumption means no income rounds.
13. Maximum multiplier occurs when MPC is:
Answer: C. 1
All income is consumed, creating infinite rounds theoretically.
All income is consumed, creating infinite rounds theoretically.
14. Multiplier is also called:
Answer: A. Income multiplier
It measures income expansion.
It measures income expansion.
15. Which reduces multiplier size?
Answer: B. High MPS
Savings reduce spending cycles.
Savings reduce spending cycles.
16. Multiplier operates strongly in:
Answer: A. Underemployment economy
Idle resources allow output expansion.
Idle resources allow output expansion.
17. Leakages in multiplier process include:
Answer: D. All of these
All withdraw income from spending flow.
All withdraw income from spending flow.
18. Multiplier value is always:
Answer: C. Greater than 1
Income change exceeds investment change.
Income change exceeds investment change.
19. If MPC falls, multiplier will:
Answer: B. Fall
Lower consumption weakens income rounds.
Lower consumption weakens income rounds.
20. Investment multiplier explains:
Answer: B. Income generation process
It shows how investment creates multiple income increases.
It shows how investment creates multiple income increases.