MCQs on Theory of Multiplier

In the context of the multiplier, what is the value of MPS in the formula K = 1 / (1 - MPC)?

What condition must be met to maintain equilibrium national income?

• Total consumption must equal total income

• Total investment must equal total savings

• Total expenditure must equal total output

• Total imports must equal total exports

What is the equilibrium level of income?

• Total investment equals total savings

• Total consumption equals total investment

• Total savings equals total consumption

• Total income equals total consumption

What does the theory of multiplier suggest?

• A decrease in investment leads to an increase in national income

• An increase in investment leads to a decrease in national income

• An increase in investment leads to an increase in national income

• A decrease in investment leads to a decrease in national income

At the equilibrium level of income, what is the relationship between aggregate saving and aggregate investment?

• Aggregate saving exceeds aggregate investment

• Aggregate investment exceeds aggregate saving

• Aggregate saving equals aggregate investment

• Aggregate saving is unrelated to aggregate investment

What equation represents the relationship between income, consumption, and savings?

• Y = C + S

• Y = C - S

• Y = I + S

• Y = I - C

What is the formula for calculating the multiplier?

• Multipler = 1 / (1 + MPC)

• Multipler = 1 / (1 - MPC)

• Multipler = 1 / (1 + MPS)

• Multipler = 1 / (1 - MPS)

If the total national savings is N250m and the APS is 0.4, what is the total national income?

• N625m

• N500m

• N750m

• N300m

How is the equilibrium level of income achieved?

• By increasing aggregate demand

• By ensuring total consumption equals total income

• By maintaining a balance between aggregate saving and aggregate investment

• By increasing government expenditure

Calculate the multiplier if the marginal propensity to consume is 0.75.

• 2

• 3

• 4

• 5