Page 1 - lesson note-Income Determination and Multiplier45
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SAI INTERNATIONAL SCHOOL
ECONOMICS
Class-XII
CHAPTER 8
Income Determination and Multiplier
(Module- 45)
Revision and doubt clearing class.
• According to Keynesian theory the equilibrium level of national income,
output, and employment is determined at the point, where = .
• According to Keynesian theory the equilibrium level of national income,
output, and employment is determined at the point, where = .
∆ 1 1
• ( ) = = =
∆ 1−
• ℎ = 1, ℎ . . . ∞ ( )
• ℎ = 0, ℎ . . . 1 ( )
• There exists a direct relationship between MPC and multiplier.
• ℎ = 0, ℎ . . . ∞ ( )
• ℎ = 1, ℎ . . . 1 ( )
• There exists an inverse relationship between MPS and multiplier.
1. In an economy 20% increased income is saved. How much will be the
increase in income if investment increases by 10,000? Calculate.
Answer: -
Given, ∆ = 20% ∆
∆ 20
=> =
∆ 100
=> = 0.2
1 1
= = = 5
0.2
∆
= 5 =
∆
∆
=> 5 =
10,000
=> ∆ = 5 × 10,000 = 50,000
